Hawaii Low-Income Housing Tax Credit (LIHTC) Program

The Hawaii Low-Income Housing Tax Credit Program plays a large part in meeting the state’s affordable housing needs. This initiative offers private developers the impetus necessary to create and preserve affordable housing for low-income people, so they have a safe, affordable place to live.

  

This article explains the intricacies of the Hawaii LIHTC Program, including the state’s QAP, compliance requirements, and key documents necessary for managing tax credits.  

QAP in Hawaii  

Hawaii’s Qualified Allocation Plan includes guidance for competitively ranking applications. Credits awarded to each state are based on population, indexed for inflation, and have a minimum of $2.635 million. Hawaii may also have credits from previously unallocated or returned credits or by using the credits originally allotted to other states that failed to use them. The latter are called credits from the “National Pool.”

 

Many acknowledge the tax credit’s impact on development, but its effects on management must also be considered. For properties to be initially qualified for the LIHTC and to continue receiving the credit without the risk of recapture, management must do, at minimum, the following: Follow all tax credit regulations throughout a 15-year compliance period. This requires a proper understanding from the management’s point of view of the tax regulations that govern this program. 

Compliance and Management: The Backbone of Success 

Developers and property managers in Hawaii must ensure that their developments fully comply with the LIHTC program regulations. It puts into effect a 15-year compliance period, whereby the property has to maintain constant compliance with the set income and rent limits so that the credits do not get recaptured. Keenness in tax credit rules and frequent monitoring are therefore advised, with precise record keeping.

 

The management side of the property must adhere to all aspects of the LIHTC. This includes maintaining income certifications and rent records and ensuring all required inspections and reporting are completed on time. Failure to do so can result in some financial penalties, including the loss of tax credits. 

Important Hawaii Tax Credit Documents 

To comply with the low-income housing in Hawaii initiatives, many documents must be immediately available and may be required for the state review. Some of those include, but are not limited to: 

 

• Tax Credit Application / Consolidated Application: The original application describes the proposed project, including how it complies with the LIHTC requirements.  

• Notice of Low-Income Housing Tax Credit Reservation, if Applicable: Reserves tax credits for the project, pending satisfaction of certain conditions. 

• HHFDC Carryover Allocation, if applicable: This document allocates LIHTCs to the project even if construction has yet to start. 

• Tax Credit Declaration: A declaration that the project meets the eligibility requirements for tax credit allocation.  

• Copies of Original, Completed, Signed Forms 8609: These are the IRS forms that certify the building’s qualification for the LIHTC. 

• Utility Allowance Source Documentation: This is the documentation used to support the source of utility allowance utilized in computing rent limits. 

• Limited Partnership Documents: Legal documents outlining the ownership structure and defining the financial obligations of each partner or shareholder. 

• Certificates of Occupancy: These certificates show that the building is up to code locally and the occupants are safely inside.  

• Rental Income Verification: It verifies tenants’ eligibility, certifying that their residential interest incomes are not more than the limits set by LIHTC.  

These documents are integral to a property’s ongoing compliance under the Hawaii LIHTC Program. Property managers must ensure that these programs are complete, accurate, updated, and available for review to ensure that a property will continue to be eligible for tax credits. 

Affordable Housing Programs in Hawaii  

Hawaii has a suite of programs to develop and access affordable housing inventory statewide. Following is an overview of the major programs:

 

Rental Housing Revolving Fund 

The RHRF offers low-interest loans to developers to construct below-market-rate rental housing aimed at households earning 60% or less of the area median income.  

 

Dwelling Unit Revolving Fund 

DURF means rental will remain affordable to Hawaii’s lower-income residents. It offers infrastructure development grants and loans to minimize the costs, thus enabling developers to build affordable housing. This fund expands the supply of affordable units into the market by removing infrastructure hurdles. 

 

Homebuyer Assistance Programs 

The homebuyer assistance programs in Hawaii help first-time homeowners with the down payment, low-interest loans, and counseling, thus enabling more low and moderate-income householders to own homes. 

 

Section 8 Housing Choice Voucher Program 

This federal program pays a portion of the rent for eligible low-income families while they seek housing. The HPHA administers Section 8 housing in Hawaii to help much-need individuals proceed and seek safe, affordable housing in a private market. 

 

Affordable Housing Development Incentives 

Hawaii offers developers incentives through density bonuses, expedited permits, and waived fees to carry out more affordable housing projects. The incentives are such that they typically lessen the development obstacles so that more projects become affordable. 

 

Homeless Assistance Programs 

The programs provide financial assistance, case management, and support services to help people and families transition from homelessness to stable housing. They will significantly impact solving Hawaii’s homeless crisis and promoting long-term housing stability. 

Conclusion 

The Hawaii LIHTC Program is one of the cornerstones of the state’s efforts in low-cost housing. The program’s success lies in the allocation of the tax credits and their management and compliance after allocation. Knowledge of the QAP in Hawaii and having all your LIHTC paperwork in order are critical ways to navigate the LIHTC Program’s complexities.

 

Through this sustained awareness and preparation, developers and property managers will be able to sustain their construction and continue providing much-needed affordable housing for all demographics in Hawaii.