Wake Forest Housing Affordability Plan - September 2022

TAKING ACTION

Town of Wake Forest | HOUSING AFFORDABILITY PLAN

Strategy 2: Create New Affordable Rental Housing

Low Income Housing Tax Credit (LIHTC) Gap Funding

Program Overview The LIHTC program allows affordable housing developers to sell awarded tax credits to private companies in exchange for cash they can use to finance development costs. The private company benefits by getting a reduction on their federal income tax liability equal to the tax credits, usually for more than what they purchased the credits for. The Town can review LIHTC affordable housing projects on a case-by-case basis and, when opportunities arise, offer gap financing to support the development of new low-income rental housing. Due to the State of North Carolina’s scoring criteria and competition for LIHTC across Wake County, there are limited opportunities for housing developers to be awarded LIHTC in Wake Forest. When opportunities arise, however, local funding is often the key to making these projects financially feasible (Figure 53). How Does it Work? The State of North Carolina awards LIHTC on a competitive basis using standardized scoring criteria. Housing developers apply for LIHTC to help fund 100% affordable housing developments. The Town would prospectively both approve the project to be built and offer gap funding, in addition to Wake County funds.

Local gap funding allows project to be viable

FIGURE 53: SAMPLE LIHTC CAPITAL STACK

WAKE FOREST LOAN WAKE COUNTY LOAN

Soft Costs

Hard Costs

Long-Term LOAN AKA "Permanent Loan"

Land Costs

LIHTC EQUITY

Generated from the sale of LIHTC

INITIAL DEVELOPMENT COSTS

FINANCING OF DEVELOPMENT COSTS

IMPLEMENTATION

1. Engage in regular communication with affordable housing developers about their applications for LIHTC. Local support for affordable housing projects helps to leverage and unlock other funding, such as LIHTC. 2. Work with housing developers to reduce administrative and regulatory hurdles for any proposed LIHTC projects. 3. Evaluate each affordable housing project to determine if the Town can contribute gap funding.

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