below. For 9% LIHTC new construction projects, the City should offer approximately $45,000 in subsidy for every additional unit offered beyond the standards established by NCHFA. The City should continue to thoroughly underwrite deals and offer a baseline level of subsidy to ensure it is granting the needed level of gap financing. The amount of this funding should be reevaluated regularly as NCHFA funding and development costs shift.
Greensboro should push developers to add additional very low-income units into their projects to receive City support. The City should be able to leverage this same funding pool to support additional units for households earning below $20,000. The City should alter its RFP and underwriting processes to encourage a higher portion of units affordable to renters earning $20,000 and
A financial gap emerges as a developer adds more units at deeper affordability levels into a project. Shifting a unit from being affordable to a household earning $30,000 annually to a household earning $20,000 annually removes about $250 a month from total collectable rent. This lowers the project’s supportable debt and leads to a development gap that must be closed by another funding source. The City is already offering a substantial amount of funding for multifamily affordable housing projects. The City offers about $1,600,000 annually through its federal HOME funding allocation alone, and the City’s 2016 Housing Bond significantly increased available funding for multifamily affordable development. In the 2017-2018 funding cycle, the City offered a total of $4,800,000 in funding via the Multifamily Affordable Housing Development Loan program, using both bond and HOME funds. In the 2018-2019 cycle, with much of its bond allocation for the program spent, the City still offered approximately $2,100,000 in funding for the loan program.
Supportable debt shrinks as units shift to deeper levels of affordability, due to the decrease in collected rent. Thus, a development gap emerges.
Example 9% LIHTC Deal, Wake County, NC
Total development costs: $8.3M
WHLP = Workforce Housing Loan Program RPP = Rental Production Program LIHTC = Low- Income Housing Tax Credit
$800K RPP Loan
$800K RPP Loan
56 total units 14 (25%) units affordable to very-low- income renters
56 total units 20 (36%) units affordable to very-low- income renters