Maine Low-Income Housing Tax Credit (LIHTC) Program

The Maine Low-Income Housing Tax Credit Program is one successful program that promotes investment in the construction and preservation of affordable rental housing for low-income families throughout Maine. 

 

The Maine Low-Income Housing Tax Credit Program was created under the Federal Tax Reform Act of 1986 and managed by the Maine State Housing Authority, Maine Housing. The complementary programs augment the federal and state mission toward more affordable housing. 

 

This program provides a tax credit incentive for builders/developers of new or rehabilitated low-cost housing for low-income renters. The LIHTC reduces the equities in financing such projects, reducing the equity needed to support it. This incentive allows the developers to take credits against their federal tax liability spread across ten years while also assisting Maine in fulfilling its housing for low-income tenants. 

 

An Overview of the Maine LIHTC Program  

Maine
Program	Maine Credit for Affordable Housing
Administering Agency	Maine State Housing Authority
Enacting Legislation	H.P. 1180 – L.D. 1645
Credit Period (Compliance)	1 year (45 years).

 

Federal LIHTC (Section 42 of the IRC) 

• The federal LIHTC offers two types of credits: the 9% competitive credit and the 4% credit, which is most often used with tax-exempt bond financing. 

• MaineHousing administers Federal credit, which is allocated on a scoring basis to ensure that there’s an opportunity of the highest possible amount of affordable housing development within that community.  

State LIHTC (Maine’s Supplementary Credit) 

• SLIHTC was also enacted in Maine in 2019, providing another layer of assistance for affordable housing development. A federal 4% credit works alongside the program, allowing developers to cover up to 60% of the cost of housing developments’ construction or rehabilitation. 

• The state tax credit is $80 million, distributed over eight years, with $10 million annually available. This credit is targeted at encouraging the retention of more than 1,000 affordable homes, with an increased focus on rural affordable housing.  

 

Eligibility Requirements for the Maine LIHTC Program   

The eligibility requirements of the Maine LIHTC program are well defined to ensure that credits go to projects that will serve the low-income population of Maine. Both for-profit and nonprofit developers meet qualification criteria, but all projects must qualify within specific requirements to be accepted.

   

Eligible Applicants  

• Eligible applicants include any nonprofit organization, public housing authority, for-profit developer, or joint venture among these parties. 

• Projects should satisfy MaineHousing’s threshold requirements, including financial feasibility, experience in development, and affordability.  

 

Affordable Housing Requirements 

• The projects shall remain affordable for at least 45 years. At least 60 percent of the units should be occupied by households with earnings below 50 percent of Area Median Income (AMI), with rent restrictions under Section 42 of the Internal Revenue Code (IRC). 

• To ensure long-term affordability, applicable applicants must waive their right to request a qualified contract under Section 42(h)(6). 

 

Set-Asides 

• Nonprofit Set-Aside: At least 10% of the annual State LIHTC ceiling is reserved for projects developed by qualified nonprofit organizations. 

• Preservation Set-Aside: Up to $750,000 is allocated annually for rehabilitation or preservation activities of currently existing affordable housing with a preference for those in rural areas or unit conversions, which are RAD in HUD’s Rental Assistance Demonstration. 

 

Application and Allocation Process in Maine  

This process of LIHTC in Maine applies and allocates funds to projects that seem the most viable and can have an impact. It considers pre-application review, full application submission, and a strict scoring system to mark and prioritize the projects relative to felt housing needs, location, and project readiness. 

 

Pre-Application Review  

All applicants are required to undergo a mandatory pre-application review by MaineHousing to determine the project’s feasibility and eligibility for LIHTC. Pre-application reviews are undertaken against the standards of financial feasibility, need for housing, and program standards compliance.  

 

Full Application  

The full application is required to be submitted via electronic media in a manner that the file contains sequential detail on the development budget, financing, design, and conformity with MaineHousing construction standards. Developers are bound to pay an application fee of $2,500. 

 

Application Scoring 

Applications are ranked based on various factors, such as location, population served (seniors, rural), and readiness to roll. 

 

Threshold Requirements 

Threshold requirements apply to applicants and are inclusive but not limited to:  

1. Affordability: At least 60% of units must serve households at 50% of the area median income. 
2. Development Costs: The TDC should not exceed reasonable limits established by MaineHousing, such as $370,000 per unit in the case of new construction.  
3. Experience: Developers ought to have enough experience and capacity to undertake LIHTC projects and with associated regulations.  

 

Credit Allocation 

Upon approval from MaineHousing, a Notice to Proceed is given with an award in tax credits if the project assessment yields a conclusive result. Upon confirmation of compliance, they may be awarded either at carryover or upon completion. 

 

Scoring Criteria 

Of course, evaluation ratings are given for site location, affordability, financial feasibility, and readiness to be built. Bonus points may be given for projects offering housing in employment-rich areas, closer to services, or employing energy-saving and more sustainable practices. 

 

LIHTC Monitoring and Compliance  

MaineHousing tracks Maine LIHTC-financed projects annually to ensure compliance with federal and state guidelines. This includes annual income certifications, tenant eligibility verifications, and physical inspections. Projects that fail to meet these LIHTC compliance requirements may be required to repay the tax credits. 

 

Development covenants also obligate developers to submit compliance reports to MaineHousing on a regular basis. This means the project will remain affordable and in excellent quality for the 45-year compliance period. 

 

Recent Activities Shaping the Future of LIHTC in Maine 

Maine’s legislative modifications and credit allocations have made significant strides in ensuring the state addresses affordable housing needs. 

 

In the 2021-2022 fiscal year, MaineHousing allocated $12.6 million in state tax credits for projects across the state. These projects include funding for new affordable housing developments, such as Mary Street Apartments in Skowhegan and Phoenix Flats in Portland.

 

State-allocated Maine credit also played an important role in supplementing projects in urban and rural settings, ensuring that the reserved allocation ensures that the state’s most vulnerable populations—seniors and rural residents, for example—have access to safe and affordable housing.    

 

Conclusion  

Maine’s LIHTC Program has grown to be a tool that has significantly broadened access to affordable housing across the state. Given such significant federal and state government incentives, the program promotes private investment in housing that benefits Maine’s low-income families and individuals. 

 

MaineHousing ensures that this program addresses the state’s most critical housing needs by emphasizing allocation priorities, long-term affordability requirements, and rural and senior housing preservation.  

 

As the program continues, it will reach a new level of impact on Maine’s housing landscape, sparking growth and stability for generations to come.  

 

To apply or to learn more about the program, contact:  

Maine State Housing Authority (MaineHousing)  

Phone: 207-626-4600  

Website: www.mainehousing.org