BEST PRACTICES IN LIHTC POLICY Brian Peters Housing

BEST PRACTICES IN LIHTC POLICY Brian Peters Housing Policy Advocate, Independence. First

ABOUT THE PRESENTER Housing Policy Advocate at Independence. First, a non-profit Center for Independent Living serving people with disabilities in 4 -county Milwaukee metro area Chair of National Council on Independent Living’s Housing sub-committee An expert on LIHTC issues…NOT!

WHO AM I TO SAY WHAT “BEST PRACTICES” IS? I want YOUR thoughts!

AUDIENCE QUESTIONS How many are familiar with Low Income Housing Tax Credit Program (Section 42)? How many know what Qualified Allocation Plans are?

THE BASICS: LIHTC: Low Income Housing Tax Credit Program Federal tax credits allocated to states through IRS LIHTC allocations vary annually In 2014, allocations were calculated at $2. 30 per capita (per person) – Small states received a minimum of $2, 635, 000 – California received $88 million! – Wisconsin received $12, 884, 395 – QAP: Qualified Allocation Plans How states say they will use the LIHTC funding Public hearings required as part of process Typically written with developers as audience � Can be confusing to newbies Important information often are in appendices Outlines the criteria by which proposals will be judged

LOW INCOME HOUSING TAX CREDIT “Section 42” of the Internal Revenue Code Two types: � 9% (new construction/ substantial rehab) � 4% (acquisition/new construction/rehab) Can be combined

LIHTC REQUIREMENTS Section 42 mandates a preference for: � Projects that serve the lowest income tenants � Projects that are obligated to serve qualified tenants for the longest period of time � Projects that are located in a qualified census tract (as defined in subsection 42(d)(5)(C)) and the development of which contributes to a concentrated community revitalization plan

LIHTC CONSIDERATIONS STATE HOUSING FINANCE AGENCIES HAVE TO GIVE CONSIDERATION TO: Housing Needs Characteristics Sponsor Characteristics Project Characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan Tenant populations of households with children Targeting of individuals on Public Housing Waiting Lists Targeting of Populations with Special Housing Needs Project Location Projects intended for eventual tenant ownership The energy efficiency of the project The historic character of the project Some states add their own requirements and preferences

STATE HFA Low Income Housing Tax Credits are administered by a State Housing Finance Agency Wisconsin’s HFA is Wisconsin Housing and Economic Development Authority (New logo!)

STATES AND QAPS Some states view LIHTC program as purely a financial transaction Other states view LIHTC as an opportunity to do some “social good” � They do the bare � Typically have more in- minimum � Very short QAP & application � Not necessarily a blue state/red state thing! depth QAPs and applications � Many goals involve homelessness and other “special needs” populations as well as energy and sustainability

“SOCIAL ENGINEERING” Trying to do some “social good” has been called “social engineering” But the absence of those actions IS a form of social engineeringparticularly if there are countervailing incentives or pressures in community Example: Pleasantsville enacts zoning ordinances designed to drive up property values. This makes housing unaffordable to low-income families � Is this not social engineering?

STATE TOOLS How do states use LIHTC as a tool for in communities? Mandates � “You must do this if you want money” � “You must do this if you want to qualify” � Sometimes developers have options- “You must do something on this list” � Example: Wisconsin has design requirements for buildings on accessibility and sustainability

MORE TOOLS Incentives � A popular way to encourage a goal � “If you do this, you’ll get x number of points” � Sometimes additional financing is offered as incentive � Examples: Income targeting, increased accessibility, transportation linkages, family size Set-asides � Done when state wants to guarantee a type of development WILL happen even if it scores low � “We’ll set aside this pot of money just for developers doing a specific kind of project” � Examples: Rural set-aside, supportive housing set-aside

WISCONSIN QAP Wisconsin’s QAPs and other information can be found at www. wheda. com. Discussing 2013 -2014 QAP, available on website Note that nitty gritty details are in appendices 2015 -2016 QAP finalized last week

QAP BEST PRACTICES During this Workshop, we shall: � Look at some of the issues with LIHTC units � Look at specific sections of WHEDA’s QAP and compare with other QAPs � Discuss what we like/dislike � Discuss what we think Best Practices should be

INCOME TARGETING LIHTC Units generally are aimed at 50% or 60% of Area Median Income (AMI) LIHTC has two income targeting options: � At least 40% of units must be targeted at people at or below 60% AMI (40/60 test) OR � At least 20% of units must be targeted at people at or below 50% AMI (20/50 test) � But typically because of fixed costs, developers will do 100% (or close to it) of units being LIHTC

LIHTC RENTS � Rent usually is set at 30% of chosen AMI level � Rent is “fixed” and does not change with household’s income � Unit income limitation calculated as: Studio=1 person Each bedroom=1. 5 individuals

WAUKESHA RENT LIMITS AT 50% AMI Bdrm # Efficiency: One Two Three Four Five Six Rent 616 660 791 914 1, 020 1, 125 1, 231 Source: Wisconsin Standard Multifamily Tax Subsidy Project Estimated Maximum Income and Rent Limits, Effective December 18, 2013 Extremely Low Income Household Wisconsin SSI (2013) � Combined Federal & State SSI payments: Individual: $793. 78 Couple: $1, 198. 05 A couple receiving SSI renting an efficiency would be paying 51% of their income-far beyond the 30% rule of thumb. � Many properties require certain threshold of income (3 x rent) Source: � http: //www. dhs. wisconsin. gov/ssi/benefits. htm

THE ISSUE: UNAFFORDABLE TO ELI LIHTC developments at standard AMI targets are not affordable to ELI households How can state HFAs reach this population? What is needed to make it work?

AFFORDABILITY OPTIONS 30% AMI is extremely difficult to reach without rental subsidies; would it be better to have more units at 40%? Some states offer additional financing to assist with deeper income targeting. But WI cannot use state funds for this. No state tax credits or tax revenue available. What programs could be used with LIHTC for additional subsidies?

2014 WHEDA QAP-ELI TARGETING 80 (out of 465) for serving Lowest Income Residents � 70 Points on sliding scale � 10 bonus points if 6 or more units � Units with project-based subsidies not eligible unless supportive housing � HOME funds OK

SAMPLE ELI TARGETING: 58. 50 POINTS Total Units for Development 44 Percentage of CMI Set-Aside Number of Units Total, (Must Multiply Percent Total Points Percentage @ CMI equal or exceed by Factor 5%) 9 20. 45 50% X 1. 00= 20. 45 40% 3 6. 07% X 1. 25= 7. 59 20. 46 30% or Lower 6 13. 64 X 1. 50= B. 10 Bonus Points Check Points Box 10 Description The application includes 6 or more 30% CMI Units.

ELI TARGETING IN ALASKA Alaska requires at least 5% of any projects with 20 or more units to serve populations with “special needs” (of which ELI is a category) � Cannot be targeted by other funding (i. e. 811) Offers discretionary basis boost (additional funding) for developers meeting certain conditions for ELI targeting

ELI TARGETING IN MASSACHUSETTS ELI is one of 4 housing priorities developers must choose to qualify. 20% of units must be for ELI. One of 13 mandatory thresholds � 9% tax credit must have 10% of units for 30% AMI � 4% tax credit and “primarily” affordable must have 10% of units for 30% AMI. IF mixed-income with 50% or more market-rate units, 15% of units must be for 30% AMI.

ELI IN ILLINOIS Developers score points (up to 10 out of 100 possible points) for units at 30% AMI as percentage of total projects. Example is for projects with 41 or more units. � 1 pts for 1%-4. 99% � 2 pts for 5. 0%-9. 99% � 4 pts for 10%-14. 99% � 7 pts for 15%-19. 99 � 10 pts for 20% or more Projects 40 units or less starts at 4% minimum up to 25% or more, similar to above

ELI IN CONNECTICUT 107 possible points in application; � Targeting units at 25% AMI earns up to 7 pts for 25% or more units (sliding scale) � 6 pts for targeting units above 25% AMI to 50% AMI (40% or more units needed for full number of points on a sliding scale)

ELI IN DELAWARE Delaware takes a balanced approach, encouraging developers to mix income target levels (30%, 40%, 50%, 60%) with higher points for targeting lower income levels Interesting that the chart for 2014 is much less complicated than the one for 2013 (next 2 pages)

2013 BALANCED INCOME TARGETING

2014 BALANCED INCOME TARGETING

ELI IN IOWA Category 1. Serves Lowest Income Residents 0 to 20 points Projects that provide Units that are set aside and occupied by tenants with incomes at or below forty percent (40%) AMGI and are rent restricted. � 1 point for each full one percent (1%) of the total Project Units (20 points maximum) Category 2. Mixed Income Incentive 0 to 25 points Projects that provide market rate Units (not eligible for Tax Credits). On-site staff Units cannot be counted for points. � 1 point for each full one percent (1%) of the Units (20 points maximum) And Serve 30% AMGI qualified tenants. � 1 point for each full one percent (1%) of the Units at 30% AMGI (5 points maximum) *Units assisted with vouchers cannot qualify for any of scoring points in this category.

ELI IN NORTH CAROLINA State law classifies counties as high, moderate, or low income. If high income county: � 5 pts if at least 25% targeted at 30% AMI OR; � 2 pts if at least 50% targeted at 40% If moderate income county: � 5 pts for at least 25% targeted at 40% AMI OR; � 2 pts if at least 50% targeted at 50% AMI

ELI IN NORTH CAROLINA If in a low income county; � 5 pts for at least 40% of units at 50% AMI � This scoring encourages ELI units in high-income counties, and does not incentivize them in low-income counties

ELI BEST PRACTICES How do we serve the ELI population? …. without using other federal subsidies? Should ELI units be discouraged in high-poverty areas? Is that not where the “need” or demand is? Some (14) states have a state tax LIHTC. Wisconsin doesn’t. Does this hurt WI efforts? You could use market-rate units to subsidize ELI units. What are pros/cons of this? What did you like/dislike?

ACCESSIBILITY Section 42 is not considered federal funding, so…Section 504 of the Rehabilitation Act of 1973 does not apply. � In other words, no requirement for increased accessibility Only Fair Housing Act would apply nation-wide. Wisconsin also has Open Housing Law. � Similar to Fair Housing Act, but lowers unit threshold to 3 or above (FHA is 4 or above), and includes accessibility triggers for rehabs.

FAIR HOUSING IS…NOT SO FAIR Fair Housing Act’s construction standards have accessibility requirements But they are the minimum requirements …. Minimum Is not very accessible for many � Scooters � Bariatric wheelchairs � Non-mobility/non-sensory disabilities

ACCESSIBILITY STANDARDS/GUIDELINES Common standards or guidelines used � Section 504 � Building code requirements (ICC/ANSI) � Universal Design � Visitability � Aging in Place Don’t forget features for non-mobility disabilities like environmental sensitivities

WISCONSIN QAP ACCESSIBILITY WHEDA has two categories; New Construction/Adaptive Reuse of non-housing structure (NC) and Rehab of existing housing (R) Design Requirements are listed for both NC & R WHEDA requires increased accessibility using ICC/ANSI A 117. 1 and part of ADA Accessibility Guidelines But only 20% of single-family/duplex/ townhomes required to be Visitable Offers points for increased accessibility features

MANDATE EXAMPLES New Mexico-Mandatory Visitability for at least 50% of new multi-family housing units Colorado has “Healthy Living Environment” with safe biodegradable materials, mold reduction, adequate ventilation, and isolation of garages Missouri requires all 12+ units to have 5% wheelchair accessibility and 2% sensory accessibility

DELAWARE ACCESSIBILITY INCENTIVES Awards additional points for developments that exceed 5% of total unit count being fully accessible units � 10% = 3 extra points � 15% = 4 pts � 20% = 5 pts Also requires marketing & renting to households that need features. If household has no disability, lease addendum allows management to transfer them if someone else needs accessibility features

ILLINOIS ACCESSIBILITY Offers points for increased accessibility under ICC/ANSI 117. 1 -2003 � 1 pt for 10% or more of units for mobility disability, AND 2% for sensory disabilities � 2 pts for 10% mobility, 2% sensory, AND Universal Design score of at least 50 � 3 pts for 10% mobility, 2% sensory, and Universal Design score of at least 75

INDIANA ACCESSIBILITY Aging in Place is a housing priority, and points are given for Aging-in-Place related services Indiana minimum of Section 504 units or similar fully accessible units is 5% for rehab and 6% for new units. Additional percentages are assigned additional points on sliding scale up to 9% to 11% (depending on type of project) Also offers incentives for Universal Designs on a sliding scale.

ACCESSIBILITY APPROACHES Do you think having accessibility mandates is a good idea? How much should be mandated? What about incentives? Should we incentivize additional units using existing standards like ADAAG, ICC/ANSI, or use newer approaches like Universal Design? What should best practices be?

INTEGRATION Integration means many things to different people To fair housing & social justice advocates, it’s inclusion of minorities/economically disadvantaged groups, and access to opportunities To advocates on disability issues, integration is inclusion of people with disabilities into community in a non-segregated way

INTEGRATION EXAMPLES Examples we discussed already includes: � North Carolina’s scoring requiring higher % of ELI units in high-income counties, but none in low-income counties � Balanced Income approaches encouraging mixes of units (i. e. Delaware offering points for 20%-50% of units being market-rate) Affirmatively Furthering Fair Housing, desegregation, etc. to avoid concentration of developments

ALASKA INTEGRATION Alaska has an unusual scoring system that encourages high # of LI units in high-income tracts, but does the reverse in census tracts with low income, giving scoring incentives for high number of market-rate units.

ALASKA PROJECT MIX

COLORADO SCORING INCENTIVE Colorado provides scoring incentives for mixedincome projects that have no more than 80% marketrate units (the max allowed under 20/50 Rule).

INDIANA

INDIANA MATRIX (REALLY!) Encourages a mix of units from 30%, 40%, 50%, 60%+ Market Rate (Similar to Delaware’s 2013 Balanced Scoring that we previously discussed) Scoring incentive based on % of units in each category, ranging from 55% of units down to 3% of units. Highest scoring opportunities is at range of 22% to 29. 99% of units for each.

NEW HAMPSHIRE Points for projects in towns with no other previously approved affordable family housing. At least 20% of units must be affordable to low income households with no age designations.

INTEGRATION BEST PRACTICES Thoughts on best way to achieve integration of LIHTC and tenants into communities? Should we encourage mixed-income buildings in low-income areas, and higher % of LI units in highincome areas? Should there be a limit on how many LIHTC developments there can be in an area? If so, what? How? � Urban density is different than rural or suburban density if using geographic distances � Wouldn’t this be a barrier for neighborhood revitalization efforts?

COMMUNITY SUPPORT EXAMPLE Many states require community support letters � Pro: Community support can smooth the way for development (zoning changes, variances, etc. ). This way, the SHFA is assured development will happen. � Con: Isn’t this rewarding NIMBYism? WHEDA provides 2 points for Local Notification, and 2 points for each support letter, up to 6 points. Letter must be from local big-wigs (my words, not theirs) Other states have similar requirements How much should support in the community impact the development?

SUPPORTIVE HOUSING Many states use LIHTC as principal funding for developments with supportive housing, with some other additional funding for services and rental subsidies Maryland offers incentives for developers that accept Section 811 Project Rental Assistance Demonstration Program for non-elderly persons with disabilities

MORE SUPPORTIVE HOUSING Wisconsin offers two types of Supportive Housing scoring for new cycle � Integrated model with no more than 25% of units targeted at persons with disabilities � “Segregated” model with 50% or more units targeted at homelessness Iowa has section in QAP that supports goals of Olmstead (community living) � Scoring incentives for visitable or fully accessible units � Scoring incentives for management training on disability issues

SUPPORTIVE HOUSING BEST PRACTICES Case managers like convenience of everyone in same location � But advocates believe scattered is best practices Disability advocates don’t like housing and services being linked in anyway Does the type of supportive services (i. e. for people with disabilities, elderly as opposed to homeless) make a difference? Should services be on-site or off-site? Your thoughts?

FINAL THOUGHTS