As more and more seniors prefer to age in place and stay in their communities, finding affordable housing is a growing challenge. And, as our population continues to skew older — it's estimated that about 10,000 Americans turn 65 every day — the need for affordable housing for seniors will only increase.
It's not only seniors who benefit from, and take pride in, affordable housing. Communities, too, benefit from enabling those with fewer resources to live safely, securely, and with dignity.
The low-income housing tax credit (LIHTC) program can offer senior housing owners, developers, and investors incentives and opportunities to close the funding gap when trying to finance the development of a new property or the renovation of an existing project. Projects awarded credits are often leased extremely quickly and also have been gaining the attention of continuing care communities as a way to bring more seniors into the fold.
The federal LIHTC program is funded by the IRS. Credit allocations are determined by state population, currently at the rate of $2 per resident. The LIHTC program is then administered by each state's housing finance agency. The state housing finance agency develops an annual qualified allocation plan (QAP) for the credit. The QAP includes the criteria that the state housing finance agency will use to award credits to owners and developers. Owners and developers with an appetite for the LIHTC are required to submit an application with the request for credits, specifically noting the projects that would use the credits and how those projects align with the effective QAP. Depending on the level of credit being sought or the specific state, this can be a competitive process.
Given the limited number of opportunities, and the many nuances of the program, it's critical that owners and developers plan ahead to lay the necessary groundwork. Owners and developers must be prepared to act quickly should they be awarded an allocation of credits. For example, developers must spend at least 10 percent of the project within a specified short time period and then have an additional window to complete the project or risk losing the credits.
In addition to a feasibility study, financial projections, and the rest of the application package, owners should enlist the help of strong financial and legal advisors with particular expertise in the LIHTC program. Advisors should be able to help connect you with investors experienced in LIHTC projects. The community of LIHTC investors is small and, if you've never done a LIHTC project before, it will be challenging to be allocated a credit without experienced investor support.
Although not specifically targeting seniors, the LIHTC program can have a large impact on their well-being and sense of pride while also creating incentives for senior care owners, developers, and investors. With careful planning, the program can prove a win-win for communities, their stakeholders, and their aging residents.
Currently, the LIHTC program is the most extensive affordable housing program in the country. Proposed legislation with characteristics that will help to strengthen the program have received criticism from both sides of the aisle. As Congress works through its efforts on proposed tax reform, modifications to the LIHTC program will be up for consideration. It is important for those individuals active in the program to continue to develop quality projects which provide affordable housing nationwide.
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