With a goal of boosting affordable housing in areas of high opportunity with access to good schools and transportation, the New Jersey Housing and Mortgage Finance Agency (NJHMFA) recently announced its timeline to award $24 million in highly competitive federal 9 percent Low Income Housing Tax Credits (LIHTC) for 2020. The tax credit awards are anticipated to generate about $230 million in private equity and create about 1,200 affordable rental apartments.
The LIHTC program, which was established by the Tax Reform Act of 1986, is the most prolific source of funding for new rental apartments affordable to families, seniors and individuals with special needs.
“Low Income Housing Tax Credits are instrumental in our ability to create affordable housing opportunities throughout New Jersey. We are guided by our efforts to deconcentrate poverty, incentivize investment in Opportunity Zones, expand opportunities for seniors and veterans, and provide housing for our most vulnerable residents,” said NJHMFA Executive Director Charles A. Richman. “These tax credits can also fund mixed-income developments which increase housing and income diversity in our communities.”
Under the LIHTC program, federal tax credits are awarded to developers to build new apartments or rehabilitate existing apartments. Typically, the tax credits are sold to investors who then provide private equity to fund construction. In return, the investors receive a dollar-for-dollar reduction on their federal tax returns for a period of 10 years. The equity generated from the sale of the tax credits can fund approximately 70 percent of a project. This additional capital lessens a developer’s debt burden and allows the project to carry a smaller mortgage. Consequently, rents will be more affordable to low- and moderate- income residents who qualify.
The application deadline for 9 percent LIHTC for family, senior and special needs proposals is noon, July 22, with awards expected to be announced in November. Non-competitive applications for mixed-income projects will be accepted on a rolling basis from April 2 until noon, July 22. NJHMFA, which administers the program, currently monitors over 700 tax credit developments of nearly 60,000 apartments statewide. No direct funding comes from the New Jersey Treasury for the LIHTC program.
Under the Murphy Administration, tax credit awards, totaling over $50 million, have been awarded to 39 developments providing for about 2,600 apartments, totaling nearly $804 million in development.