Blogs| Missouri Low-Income Housing Tax Credit (LIHTC) Program
Written by
Sajan Sharma
Published
Oct 15, 2024
Topics
State LIHTC
The LIHTC is the primary source of state support for facilitating affordable housing development in Missouri. Missouri’s Housing Development Commission administers the program, which, leveraging private investment, enhances the state’s housing inventory through low-income rental housing development and preservation.
Take a closer look at how Missouri’s LIHTC program works and how that benefits the state.
The Missouri LIHTC program is a reflection of the federal tax credit system and is one of the most important tools the state has for advancing affordable housing. However, what makes the Missouri LIHTC program stand out from others is that the tax credits at the state level augment the federal credits to heighten the incentive for private developers to participate.
With this dual tax credit system, developers can sell the credits to investors to raise the equity needed to construct and rehabilitate affordable housing projects. The developments may reduce the debt burden, provide lower rents, and make housing affordable to families, seniors, and individuals with disabilities.
The Low-income Housing Tax Credit (LIHTC) program at the State of Missouri has definite parameters that ensure long-term affordability. When developers are allocated credits, they agree to maintain affordable and income-restricted rents for 30 years. The credits are spread over ten years, but the developer does not get out of requirements beyond the credit itself; the properties must remain compliant for 15 years, then an extended use period of 15 years follows. This ensures that the costs of housing units are guaranteed a long time after the beginning credit period has ended.
Missouri’s Qualified Allocation Plan (QAP) specifies how LIHTC credits are allocated. The program emphasizes housing projects that can benefit the most needy populations, which in this case are low-income families, older people, and people with disabilities. The developers must also meet specific location, design, and sustainability qualifications.
This Missouri LIHTC was initiated many years ago to ensure the development of thousands of affordable units in Missouri. In general, the program’s objective is to cater to the needs of the state in providing affordable housing to a reasonable section of its renters who spend at least half their income on housing.
Currently, about 25 percent of all US renters face this problem, and the rise of homelessness only fuels the growing burden of housing. The increasing burden of housing is coupled with a growing trend of homelessness among various vulnerable groups, including children and veterans.
The LIHTC program has enabled Missouri to bridge the gap in housing insecurity more profoundly by boosting new affordable unit construction and rehabilitation.
The LIHTC program has had especially beneficial effects on the elderly population. For example, by providing low-income housing with some on-site services, many elderly residents have been diverted away from the more expensive options of care through Medicaid-funded nursing homes. Such an outcome, therefore, brings significant savings to the state while providing safe and stable shelter to the seniors.
The Missouri Housing Development Commission has recently made huge investments in LIHTC programs. In 2023 alone, the state assigned a total value of $380 million in tax credits for low-income housing, and the state continues to strive for more affordable housing.
The Missouri LIHTC program has also faced some criticisms. A state audit revealed inefficiencies, mainly in terms of administrative costs. Critics claim that too much LIHTC funding goes toward overhead and not building affordable housing.
However, more responsive defenders of the program note that tax credits ensure far greater private sector accountability and oversight than grant-based systems. Credits are only distributed after units are built, leased, and recaptured if a project does not meet LIHTC compliance standards.
Reforms such as those in Missouri have been made to address these problems by emphasizing efficiency and proper use of tax credits. To achieve this, the MHDC carefully tracks each project it funds under the LIHTC and reviews and inspects each regularly to ensure conformity with state and federal requirements.
As part of its affordable housing strategy, Missouri has found a new approach to concentrate on workforce housing—a gap in the marketplace available to middle-income workers who do not qualify for traditional low-income housing but still suffer from housing cost burden. Workforce housing is critical where housing costs outpace wages, such as in urban centers and emerging economic development locations. Adding the workforce housing initiatives to LIHTC, Missouri is responding to a wider range of needs from its population.
LIHTC for Missouri is important since it assures the state addresses the housing crisis faced by the people. Because of the program, affordable housing is provided and remains viable due to private investment. Low-income families, older people, and veterans, among others, benefit from this. The program had seen its share of challenges, but its changing nature and restructuring are evidence of continued state investment in affordable housing in Missouri.
Missouri is well-positioned for the increased demand that will be experienced in the future with significant recent investments and a focus on both low-income and workforce housing.
This program, by encouraging public-private partnerships and providing long-term affordability, remains an essential source of financing to expand and preserve affordable housing for Missourians.
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