State-backed developer wants to build affordable housing. Will Meridian taxpayers help?
Last month, an affordable-housing nonprofit asked the city of Meridian to lend it over a million dollars to help build a small affordable-housing complex. The reason: a funding shortfall from a federal program that was designed to cover the entirety of a low-income housing project.
Prices of land, gas and building materials have gone up over the past three years, but money available from the program to support the development of affordable housing has not. This leaves developers like the nonprofit The Housing Co., a creation of the Idaho Housing and Finance Association, at the mercy of local governments, private employers and other private partnerships to provide funding for affordable housing projects.
The Housing Co. was established by the Idaho Housing and Finance Association to build and operate affordable rentals around the state. The association is a self-supporting institution created by state law to carry out certain government functions, including running several federally funded affordable-housing programs in the state.
The Housing Co.. will be one of many developers applying to the association for a piece of Idaho’s share of the federal Low Income Housing Tax Credit program this summer.
Developers say the tax credits are an essential incentive, since building new affordable apartments is unprofitable without government financial help.
The Housing Co.’s Meridian project is called the Wood Rose Apartments. It would have 52 affordable apartments in eight two-story buildings. It would be located at 1160 W. Ustick Road, on the north side of Ustick near the east side of Linder Road. The apartments would target people with incomes below 60% of the area median income, which is now $35,400 for one person, $40,440 for a family of two and $50,520 for a family of four.
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According to the Idaho Housing and Finance Association’s website, seven developers applied to the program last year. This year IHFA has $6.45 million in tax credits to give to developers.
The program is highly competitive, said Kathryn Almberg, the vice president and director of operations at the Housing Co. About three in five applicants are chosen, she said.
Gap in federal funding and building costs grows
For years, the low-income housing tax-credit program has been criticized for its shortage of funding, especially as the need for affordable housing has grown amid rising rents and house prices across the country and in Idaho.
Reports from the Urban Institute, a nonprofit research organization, found that the program fails to meet housing needs for extremely low-income renters, and that projects that provide 100% of their units to extremely low-income residents frequently need more funding than the program provides.
As the Statesman has previously reported, the Idaho Housing and Finance Association, a quasi-governmental agency which allocates the federal credits through a competitive process, is limited in how many tax credits the federal government allows it to give out. To spread the wealth statewide, the association sets a maximum of $1 million in 10-year tax credits it will allocate per project.
The association accepts, selects and distributes the funds from the program to projects each August. (This year’s application deadline is Aug. 5.)
In 2020, the association allocated $4.8 million in tax credits to eight projects for 296 new living units, of which 78 were in the Treasure Valley, all in Boise, according to previous Idaho Statesman reporting. In 2021, it allocated $7.3 million for 11 projects — four in the Valley — and nearly 500 units. This year, it has $6.4 million to dole out.
Erin Anderson, development manager for The Housing Co., spoke to the Meridian City Council last month to ask for $1.35 million to support the Wood Rose Apartments. She said that in a recent association presentation to the council, the association did not provide a “current representation of the funding challenges and increased gap we face for an affordable housing project.”
Each year, IHFA creates a plan that maps out the requirements for projects to get funding. A recent addition to the plan was the amount of local government participation a project receives in financial and political support, Almberg said by phone. But now with building expenses so high, the local government assistance is needed for more than just a bump in a project’s application.
“As projects get more expensive and resources are scarce, (asking for city support) becomes more commonplace,” Almberg said. “We are looking not only for city support, but for private party contributions or donations, partnerships with employers that may need housing. We’re turning over every stone that we can.”
How do the tax credits work?
The Low Income Housing Tax Credit Program was created in 1986 as part of the Tax Reform Act. The program allows a private company to invest in affordable housing projects in return for tax credits that reduce the company’s federal tax responsibility.
The federal government gives each state tax credits based on population. Each state then selects projects that get the credits.
As the need for affordable housing increases in Idaho, so do the projects that apply for federal funding.
“It’s a very stressful and competitive process,” Almberg said.
If the Housing Co. is not chosen, it would be impossible to fund the project with just private money, Almberg said, so the project would not get built this year. The Housing Co. could apply again next year. If that fails, the company could stop trying and just sell the land it owns where the project is planned.
Anderson said in a presentation to the Meridian City Council that in a study area that included Chinden Boulevard on the north, Eagle Road on the east, Victory Road on the south and McDermott Road on the west, there was a 2.2% vacancy rate in market rate apartments and a 0% vacancy rate in subsidized apartments, this year. There are only 50 subsidized apartments in the area, Anderson said.
The Meridian City Council will consider the loan to the Housing Co. in its budget cycle, the council members said. The city could provide the funds through its general fund or by eliminating impact fees for the project. Impact fees are fees that local governments can charge developers on new development for the impact the development would make on some of the government’s financial resources.
“Meridian hasn’t had a tax credit or an affordable housing project done in close to 20 years probably,” Almberg said. “I hope we can get it funded. We are trying as hard as we can, but you know, we’ll just see what happens.”
This story was originally published July 11, 2022 at 4:00 AM.
