Delaware Low-Income Housing Tax Credit (LIHTC) Program

The Delaware Low-Income Housing Tax Credit Program is a comprehensive resource that simplifies the complexities of affordable housing, making it easier for developers and residents to understand and navigate the program.

 

The Delaware State Housing Authority (DSHA) established the Low-Income Housing Tax Credit (LIHTC) program to ensure sustainable and efficient housing for individuals with low to moderate incomes. The DSHA introduced this federal program to promote affordable housing development and preservation and assess Delaware’s real estate landscape.

 

This article will explain how this initiative operates in Delaware, its effects on society, and what you can do to participate.    

 

LIHTC Program in Delaware   

The Federal Low-Income Housing Tax Credit (LIHTC) program was established under Section 252 of the Tax Reform Act of 1986 and codified as Section 42 of the Internal Revenue Code (IRC) of 1986. The Revenue Reconciliation Act of 1989 further amended IRC Section 42 by adding Section 42(m), which mandates that the agencies allocate LIHTCs as per the QAP. DSHA oversees this allocation. 

 

About DSHA      

The Delaware State Housing Authority (DSHA) was established in 1968 to provide quality, affordable housing opportunities and supportive services to low- to moderate-income Delawareans. DSHA serves as the State’s Housing Finance Agency and a Public Housing Authority in Kent and Sussex Counties while also functioning as a community development and planning agency. 

 

DSHA’s Commitment to Affordable Housing    

The LIHTC program in Delaware was set up in 2008 to rehabilitate existing affordable housing.

 

Working for DSHA as a housing mortgage finance officer, Lisa McCloskey said, “We are focused on preservation.” According to a study commissioned by the DSHA, about 1,800 subsidized apartments in Delaware were in a position to leave their affordable housing programs by 2012, thereby overstepping into existent demand for new affordable apartments throughout the state. 

   

DSHA has allocated over $1.6 million of its $2 million LIHTC budget for preservation developments statewide in 2008, eliminating Delaware’s two geographic set-asides.  

 

According to DSHA’s proposed qualified allocation plan, which was expected to be finalized in February, the remaining tax credits were split between projects developed by nonprofits and those intended to house people experiencing homelessness. However, these figures leave little room for constructing new low-income housing, as building from scratch typically requires LIHTC reservations exceeding $200,000 due to the high land and construction costs.   

 

Preservation and Green Building Initiatives in Delaware   

Delaware’s preservation goals align well with the state’s broader plan to promote green, affordable housing that conserves resources, including building materials. Since 2006, all LIHTC applications must meet Delaware’s green building standards to be competitive.  

 

In 2007, three of the four projects that received LIHTC allocations were rehabilitation deals, with only two preserving existing affordable housing. A third project transformed an existing building into housing for people without homes. In contrast, the fourth, a new construction project of 44 apartments, received a $524,000 LIHTC reservation—a considerable sum for a new build.   

 

In the 2008 application cycle, DSHA received requests totaling $2.2 million, with the final reservations amounting to $2 million.   

 

Delaware Affordable Housing – Ongoing Efforts and Achievements   

“DSHA continues its aggressive and consistent efforts to add new affordable rental units to Delaware’s housing stock,” said Eugene Young Jr., Director of DSHA. “These communities, once developed, will change the lives of families and seniors alike, bringing us one step closer to solving the state’s housing crisis.”  Since its inception in 1987, DSHA has administered the LIHTC program, adding more than 10,000 affordable units to Delaware’s housing inventory.   

 

Delaware LIHTC Program Approval Process   

This Qualified Allocation Plan (QAP) applies to all DSHA allocations for the 2023 and 2024 LIHTC under Section 42 of the Code, as well as multifamily private activity tax-exempt bonds, the Housing Development Fund (HDF), Housing Trust Fund (HTF), and HOME Investment Partnership funds (HOME) in conjunction with DSHA’s LIHTC program. DSHA will hold an annual LIHTC application round in 2023 and 2024. Before credits can be allocated, the governor of Delaware must approve the LIHTC Delaware plan. 

 

On December 30, 2022, John Carney signed the LIHTC Program Allocation Plan of the State of Delaware into law. Prior to that, public hearing notices were published from November 21 to December 11, 2022. Oral or written comments on QAP were made during a virtual public hearing on December 12, 2022.   

 

Eligible Affordable Housing Options in Delaware    

The Low-income housing tax credit program in Delaware offers support for acquiring, demolishing, rehabilitating, and constructing new residential buildings from historical or non-residential structures.  

 

Several conditions must be met to qualify for these developments, such as when an award is given until the service date, how much the tenant should earn, its maximum rent level, and the percentage of LIHTC occupancy. It is also required that all buildings financed through LIHTC have a land-use covenant to regulate their use during their period of affordability.  

 

How to Apply for Delaware Affordable Housing  

To apply for LIHTC, applicants must ensure they meet all program requirements and that all potential low-income resident qualifications are satisfied. Applicants should download and complete DSHA’s LIHTC application package, including all relevant exhibits, and submit it by the applicable program year deadline.   

 

Applicant and Resident Qualifications  

Both for-profit and nonprofit developers are allowed to apply for LIHTC assistance. This program aims to provide a fair return for private and corporate investors in affordable housing, focusing on benefiting low-income families. The owner may include individuals or limited partnerships that rent out housing, meet the program’s guidelines, and apply for these credits. Projects must comply with IRS/DSTA household/resident income limits, which should not exceed 60% of median income, adjusted by family size and county. Rents are required to be kept within the affordability range for families making less than 60% of the median income. Out of all the units, at least 20% should be rented out to households earning below 50% of the area median income, or 40% should be rented out to those earning below 60% of the average income in that particular area. In addition, some percentage of all rental units should serve Delaware’s most underprivileged populations.  

 

Conclusion   

The Delaware LIHTC program has been a significant tool to address the affordable housing needs in the state. DSHA does much to stem the tide of Delaware’s housing crisis by preserving existing affordable units and incentivizing additional new ones. Be it as a developer seeking to participate in the program or as a resident of Delaware looking for affordable housing, a key to Delaware affordable housing is an understanding of the LIHTC program itself.   As the program continues to evolve further in its mission, it stands firm on safe, affordable housing for Delawareans, promising a stronger future for many.