Housing GSO: HRA Greensboro Affordable Housing Plan

AFFORDABLE RENTAL HOMES

SUBSIDIZE 4% DEVELOPMENT | Overview

The City should dedicate new local funding to leverage federal subsidy and private financing for 4% LIHTC projects. Greensboro must significantly increase the production of affordable rental homes to keep its existing affordable housing shortage from increasing, and 4% LIHTC awards can be used to help increase the available supply.

Key Partners • City of Greensboro NDD • LIHTC Developers

Unlike the 9% LIHTC award, 4% LIHTC awards are available to any project that meets NCHFA affordability requirements. While 9% LIHTC awards are awarded competitively, 4% LIHTC awards are non- competitive, flexible and available to any project that meets baseline requirements. However, they provide less subsidy than 9% awards and typically cover only a third of total project development costs. Greensboro could use 4% tax credit awards to increase its production of affordable rental homes, just as Wake and Mecklenburg counties have in recent years. The availability of 9% tax credits is limited and Greensboro will continue to only receive one to two deals per year, typically representing about 150 new units annually. 4% LIHTC awards are non-competitive and can be used for rehabilitation and adaptive reuse projects, as well as new construction, which makes it a useful tool in markets like Greensboro, where there is significant stock of existing buildings in need of investment. Additional dedicated local subsidy is required to deploy 4% LIHTC effectively in Greensboro. Greensboro’s existing low average market rents are insufficient to make up for the larger development gap that exists with 4% awards, which is why the tool has been sparsely utilized by developers. The one recent exception, the mixed-income Printworks Mill adaptive reuse redevelopment, was able to achieve feasibility through cross-subsidization with market-rate units, historic tax credits, and City gap funding, in addition to equity from the 4% award. In other cases, the significant funding gap has steered developers away from pursuing 4% LIHTC awards in Greensboro. In addition to financially subsidizing 4% deals, the City can minimize administrative requirements on developers pursuing 4% development by expediting review and permitting processes, reducing development fees and reducing required infrastructure investment to further support project feasibility.

Action Steps

1. Dedicate new local public funding to make 4% LIHTC development feasible

2. Establish an RFP process to identify and underwrite feasible 4% LIHTC projects

Anticipated Cost to Implement: ~$30K-$35K Required subsidy per unit

HR&A Advisors, Inc.

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