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
Long-Term LOAN AKA "Permanent Loan"
Generated from the sale of LIHTC
INITIAL DEVELOPMENT COSTS
FINANCING OF DEVELOPMENT COSTS
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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