Home Rental industry Financing and reform of affordable housing: current administration aims to strengthen the sector

Financing and reform of affordable housing: current administration aims to strengthen the sector

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The current affordable housing crisis has been a situation our nation has faced for quite some time. While there has been undeniable progress, there is still a long way to go. To this end, the current administration aims to implement additional policies and programs that will help close America’s current affordable housing deficit. What better way to initiate change than to streamline the process, remove barriers and make deals fairer? For industry players, this means increased incentives and opportunities to energize and enable developers to be a part of the solution. This means that affordable housing is a very active market and will continue to be hot until 2022 and beyond.

Zoning reform is being considered at the local, state and federal levels. Across the country, zoning reform will help expand the affordable housing stock and opportunities (via location availability). What does it mean? In some areas, this means eliminating exclusionary zoning policies that limit lot sizes and height restrictions imposed and implementing inclusion zoning that requires (or encourages) a certain percentage of below-market units. to be included in new developments. Cities like Sacramento and Berkeley, Calif., Have taken historic steps to reduce the amount of land devoted to single-family zoning, which is an important step in creating space for more affordable housing. As zoning reform takes shape in your area, it will be crucial to pay close attention to emerging markets and opportunities that may not have been feasible or available before.

Opportunity Zone Initiatives Defer Taxes! They represent additional policy changes aimed at encouraging development in distressed communities. The main purpose of Qualified Opportunity Area (QOZ) designations is to foster partnerships between cities and developers who focus their attention and attention on areas in need that have been historically overlooked. The incentive allows the deferral of the payment of capital gains tax. Similar to a 1031 exchange, a 1231 Qualified Opportunity Fund (QOF) defers tax liability for capital gains if invested in a QOZ project.

Similar to Opportunity Zones, Federal and State Incentives to “Preserve History” are used to help preserve and develop affordable housing in areas that were once considered best used by being razed or ignored as they had already come under the urban scourge category. Historic Preservation is an additional tax credit that can be combined with state and federal tax credits to make the affordable housing project even more feasible / economical. It’s an extra layer of benefits. In many cases, community heritage and traditions can be deeply rooted in these areas, so revitalization can quickly gain momentum through local support and inclusion in the overall development and planning process.

The federal risk-sharing program allows developers to leverage government programs such as HOME funds to tackle projects that might otherwise not be funded because they are not desirable or feasible through models or sources and uses traditional financing. Increasing the volume / provision of federal (and state) grants and awards to projects and developers, such as the recent $ 143 million grant allocated to Preserving Affordable Housing for Seniors (section 202s / PRAC ), maintains interest and interest in various CRE sectors, not just traditional Section 8 / affordable multi-family housing.

Additionally, the Federal Housing Finance Agency (FHFA) recently approved a $ 350 million increase in Fannie and Freddie’s annual cap for LIHTC investments, bringing it to $ 850 million each. This is a big step in the right direction to support efforts to provide affordable rental housing in underserved markets.

The change in momentum is noticeable, and the above incentives and policy changes are just a few instruments that attract the attention and stimulate the continued interest and action of LIHTC, which only widens the pool of potential affordable housing projects. Retaining a consultant who has in-depth knowledge of these incentives and programs will help keep your projects on track and ensure that you take advantage of all available opportunities.

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