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Presented by Sammy Ehtisham
Midwest Housing Equity Group, Inc.
About Me:
Sammy Ehtisham
Acqusitions Manager for MHEG’s Oklahoma
Operations
Work only with Low Income Housing Tax
Credit financed developments
6 years
Current territory includes Oklahoma,
Arkansas, and North Texas
Today’s Discussion
We are going to talk about something
much more exciting than a way to
combine a financing source with tax
credits.
So….let’s talk about:
S_X! I
Our Discussion Will Include
General Overview of LIHTC
LIHTC with HOME
LIHTC with RD 515
LIHTC with RD 538
LIHTC with AHP
LIHTC with Tax Exempt Bonds
What is the LIHTC Program?
The Federal Low Income Housing Tax Credit program was created under the Tax Reform Act of 1986, as amended.
This program creates affordable rental housing through a partnership of public and private partners.
The program is responsible for the creation of more than 2.5 million units of affordable housing since inception.
How many credits are available?
Each year population figures for each
state are estimated and each state
receives their allocation of credits based
on a predetermined formula.
In 2012, the Oklahoma allocation of
credits was $8.3 million, as determined
by population.
So what’s the benefit of LIHTCs?
Owner Structure
0.01% to the General Partner (or Managing
Member in an LLC)
99.99% to the Limited Partner (or Investor
Member in an LLC)
The resulting ownership structure is how
the benefits flow to the partners.
What we’ll look at for each
financing combination
General Program Information
Advantages
Disadvantages
Layering complexities
HOME – General Information
Funds are administered by HUD,
through Participating Jurisdictions
There are 6 PJs in Oklahoma
What is the HOME Program?
LIHTC w/ HOME Advantages
Awards in the form of grants to Non
Profits
Now available to for profits
38% of HOME funds set aside for LIHTC
Minimum 1% Debt Service
LIHTC w/ HOME Disadvantages
Can only apply in 2nd Round of LIHTC
Separate lengthy application
Subject to federal appropriation
Cross cutting federal regulations
HOME Layering Issues
Must have Low HOME and High HOME
rents
New construction period of affordability
not equivalent to LIHTC compliance
period.
RD 515 – General Information
Loans available direct from USDA-RD.
Administered through each state office.
What is the 515 program?
LIHTC w/ RD 515 Advantages
30 year term and 50 year amortization
1% effective interest rate
Units generally have some type of rental assistance through RD
Rents can be in excess of the LIHTC limits
LIHTC w/ RD 515 Disadvantages
Limited cash flow allowed – Return to
Owner
Rural Areas
Must request rental increases through
RD.
LIHTC w/ RD 515 Layering Issues
Restrictions on the terms of additional
debt, if needed.
Generally require much higher per unit
per year replacement reserve deposits
RD 538 – General Information
What is it?
Lender based loans
LIHTC w/ RD 538 Advantages
No Return to Owner limitations like the
RD 515 program.
Lender gets a 90% guaranteed loan
Terms – Minimum 25 years and a
maximum of 40 years. Amort. up to 40
years.
LIHTC w/ RD 538 Disadvantages
Limited eligibility
Loan fees are expensive
Is the benefit of the loan really worth the
extra expenses?
RD 538 Layering Issues
Additional Reserve Requirements
Annual fee adds to operation expenses.
Otherwise meshes very well with
LIHTCs.
AHP – General Information
FHLB
Topeka
What is the AHP program?
LIHTC w/ AHP Advantages
Grants
Works very well with LIHTC
LIHTC w/ AHP Disadvantages
Limited funds
Very competitive
Max per project
AHP Layering Issues
Grant funds into LIHTC deal
Keep to promises in Tax Application
The Greatest Advantage of All of
These Financing Combinations?
Leverage Points in the LIHTC
Application!
Tax Exempt Bonds – General
Information
How much is available?
OHFA
LIHTC w/ Tax Exempt Bonds
Advantages
Plenty of bond cap available.
Allows access to non-competitive 4%
LIHTCs
Deep skewing of rents not required
Great for larger deals
LIHTC w/ Tax Exempt Bonds
Disadvantages
Significant additional fees
More debt risk
More parties involved, slower to get
through process
No 9% credits
Tax Exempt Bonds Layering
Issues
50% of the basis for the project must be
financed with Tax Exempt Bond
financing
Use 4% rate….not fixed.
Works very well with LIHTC’s
Questions about LIHTC:
Sammy Ehtisham Darcy Green
Midwest Housing Equity Group Oklahoma Housing Finance Agency
405-278-7909 405-419-8145
[email protected] [email protected]
Questions about HOME:
Darcy Green
Oklahoma Housing Finance Agency
405-419-8145
Questions about RD 515:
Debora Phillips
USDA RD
580-726-3347
Questions about RD 538:
Tammi Miller
USDA RD
580-889-2554 ext 114
Questions about AHP:
Jeff Ragsdale
FHLB Topeka
785-438-6034
Questions about Tax Exempt Bonds:
Darrell Beavers
Oklahoma Housing Finance Agency
405-419-8261
