New York Low-Income Housing Tax Credit (LIHTC) Program

The Low-Income Housing Tax Credit (LIHTC) Program in New York encourages private funding to build affordable rental units.

 

Both the state and city administer this program. City officials from the New York City Department of Housing Preservation and Development (HPD) take part in the vetting and approval of projects.  

 

For New York State, the Homes and Community Renewal (HCR) department assumes authority in giving tax credits to build, keep, and increase affordable housing choices throughout the state. 

 

In this article, we explore how well the New York LIHTC has been able to achieve its goals of providing affordable housing, how it works, its administration, and its eligibility. 

How the Tax Credits in New York Work 

New York’s LIHTC program provides tax credits to private builders and investors. These credits help lower the expenses linked to creating or fixing affordable rental homes.  

 

LIHTC credits offer a direct decrease in federal tax responsibilities. This system helps builders gather funds from others and reduces the demand for borrowing money. 

 

There are two primary kinds of tax credits in the LIHTC program in New York: 

 

• 9% Competitive Credits: These credits cover about 70% of the allowable building costs (land not included). They are given out through a contest where New York sets yearly goals for giving credits. This means builders must meet certain conditions to qualify that you can find in the QAP for the relevant year. 

• 4% Non-Competitive (As-of-Right) Credits: These credits cover about 30% of building costs and apply to projects funded with tax-free bonds. Unlike the 9% credit, the 4% credits do not go through a competitive tender and are available all year. This approach offers a steady funding source, which is very handy for larger or mixed-use projects. 

 

Credits are given out each year over 10 years. After a builder gets tax credits, they often sell them to investors. Investors can then use this credit to lower their federal income tax. This helps with upfront equity, so the developer needs to take out less debt for building affordable housing projects.

  

The projects must meet affordability and tenant-income rules for 15 years, with another 15 years of keeping rents low to avoid losing credit. 

LIHTC Administration at the City Level 

The New York City Department of Housing Preservation and Development (HPD) handles part of New York State’s federal LIHTC share and uses $12–$14 million each year.  

 

This sum helps build about 1,000 low-income homes yearly, spread over 20 or more plans. It administers the five counties of the city, Kings, New York, Queens, Richmond, and Bronx County. HPD gives LIHTC developers money through both competitive bidding and as-of-right methods for new construction and big repair projects that match rent affordability rules. 

 

The 9% LIHTC follows New York City’s Qualified Allocation Plan (QAP). The QAP includes selection rules aligning with city goals, like favoring plans in Qualified Census Tracts and one that help seniors, veterans and disabled people. The QAP gives extra points for green building, closeness to public transport and plans that add community features or benefits.

 

Moreover, HPD supplies help for repair and renovation of LIHTC developments. The office sees the need both for creating cheap new homes and keeping current ones in good shape. Many plans backed by HPD use LIHTC along with other money sources, like tax-free bonds, the HOME program, and city aid, to make projects possible financially.

Affordable Housing in New York City: Ten-Year Plan for the Five-Boroughs  

HPD’s control of LIHTC connects closely with the Housing New York Plan, an ambitious approach started in 2014 to tackle the city’s housing issue by forming and keeping 200,000 affordable homes over ten years. The plan helps many income levels, from very low-income families to the middle class. It targets four simultaneous goals. 

 

Fair Development Across Boroughs 

The plan focuses on building affordable homes in all five boroughs to promote economic variety and support steady, lively communities. This includes giving priority to projects in areas that do not have enough affordable housing options and are facing fast market changes that might push out lower-income people. 

Keeping Affordable Housing 

An important part of the plan is to maintain the number of affordable housing units in New York City. This involves fixing old buildings for long-term affordability and better living conditions for residents. LIHTC often helps finance big repairs of buildings that have affordable housing units and need renovations. 

Supportive and Accessible Housing 

Knowing the different needs of New York City residents, the plan supports building supportive housing with services for groups like seniors, the formerly homeless and people with disabilities. HPD works with service providers to confirm supportive housing projects can meet residents’ needs. 

Creative Financing and Resource Utilization 

HPD and other city agencies keep improving financing methods and using LIHTC with other federal, state and local funds to keep projects practical. This involves looking into public-private partnerships and finding more funding sources to support the plan’s wide goals. 

Through this 10-year action plan, HPD and the city hope to build diverse, mixed-income areas that give good, affordable housing choices. The LIHTC program in New York City is crucial in reaching the Housing New York Plan’s goals, assisting both new projects and fixing existing affordable housing units. 

LIHTC Administration in New York State 

New York State Homes and Community Renewal (HCR) is the housing agency for overseeing LIHTC across the state. HCR manages both the 9% and 4% tax credits across the state. 

 

The 9 percent LIHTC by HCR is also competitive and grants credits via a Request for Proposals (RFP).  

 

Evaluations of projects are conducted according to guidelines in the state’s Qualified Allocation Plan which emphasizes affordable housing initiatives for regions and vulnerable groups in priority areas. Projects that offer support services integration or develop mixed income housing units while being situated in priority areas are given scoring advantages during the selection process.  

 

The 4 percent LIHTC for the state involves pairing the 4 percent tax credits with tax bonds issued by the state’s Housing Finance Agency. These credits are granted automatically to projects that meet qualifying standards ensuring steady funding for such projects. The 4 percent credits are especially beneficial for larger scale projects. They are commonly used in sizeable constructions as well as mixed-use developments.  

 

HCR’s LIHTC program guarantees that people from all income brackets and diverse housing requirements have access to affordable housing options throughout the state. 

Preservation of LIHTC Building in New York: The Year 15 Plan 

As LIHTC projects reach the end of the 15-year affordability period in New York City, problems with keeping costs low and running smoothly often appear.  

 

HPD’s Year 15 Plan helps owners keep LIHTC projects affordable and in good condition for another 15 years. The plan provides advice, financial help and smart support to keep LIHTC properties successful for a longer time. 

 

Financial Changes: HPD partners with property owners to adjust money plans for smooth operations. This might mean changing current loans, finding more financial help and using private loans for upgrades. 

 

Longer Affordability: HPD helps owners keep rental costs low so that homes stay open to people with low incomes for a longer time. Updating the rent agreements and revamping the income restrictions for affordable housing are some ways the HPD ensures this. 

Eligibility and Application 

All LLPs, private individuals, corporations, and limited partnerships are eligible to apply for LIHTC for their development projects in the state of New York. 

 

Developers can access LIHTC for all eligible units that will house low-income families, i.e., families that have a household income of less than 60% of the average median income of the area.  

 

If you are a developer interested in applying for LIHTC, the HPD application portal is a good starting place. 

 

Since the 9% LIHTC applications are competitive tenders, developers need to study the latest Qualified Allocation Plan to maximize their advantage. 

 

Some factors that affect the LIHTC application score are: 

1. Financial leverage 

1. Green building credentials 

1. Income mix 

1. Community impact 

1. Experience of developers 

1. Units set aside as low-income housing  

1. Accessibility 

Here is a useful checklist for developers to go through before submitting the LIHTC application on the web portal. 

New York’s LIHTC Program is Crucial 

The LIHTC program is very important in New York’s plan to solve housing problems by building new and affordable housing. HPD, HCR and the other stakeholders in the low-income housing ecosystem work together to help build and keep affordable homes in the state.  

 

New York’s LIHTC program is the mainstay of the state’s strategy to incentivize private developers to build new affordable housing, preserve the ageing affordable housing infrastructure, and create equitable neighborhood developments.