Rhode Island Low-Income Housing Tax Credit (LIHTC) Program

Rhode Island LIHTC is a state-administered program that encourages affordable housing production in Rhode Island. It incentivizes developers to produce projects offering safe, stable housing to low—and moderate-income families. Through tax credits, the state promotes projects within areas with the highest needs, sometimes prioritizing the elderly, veterans, and rural communities.

 

Low-income families and tenants can leverage both the state and federal LIHTCs to increase access to affordable housing and alleviate Rhode Island’s housing crisis.  

 

The state resource delves into the program’s structure, eligibility requirements, application processes, funding, compliance, and broader impact on Rhode Island’s communities.  

 

Overview of Rhode Island’s LIHTC Program 

The LIHTC program in Rhode Island is operated in coordination with the federal LIHTC. Administered by Rhode Island Housing, this program provides tax credits to developers who construct or rehabilitate affordable rental housing units. The credits, then applied over 10 years, are an important source of equity financing for projects that would otherwise face major financial impediments. Developers can now offset a fraction of their federal tax liability with these credits, making affordable housing possible. 

 

Two forms of Rhode Island LIHTCs include 4% and 9% credits allocated: 

 

4% LIHTC is mostly set for bond-financed projects, with the exception that it’s not competitive. 9% LIHTC is allocated by competition among priority projects where eligibility is based on state LIHTC eligibility criteria, such as housing a high-need population or implementing sustainable building strategies.   

 

Rhode Island Qualified Allocation Plan (QAP) 

The Rhode Island Qualified Allocation Plan (QAP) is the core document of the program that determines the guidelines of the Rhode Island LIHTC. Rhode Island Housing regularly reviews and updates the QAP in consideration of emerging housing needs and state-wide priorities. The QAP spells out eligibility criteria, project priorities, and scoring points for tax credit allocation.  

 

Key priorities under QAP are –

   

• Housing for Vulnerable Populations: Special emphasis on projects for low-income families, seniors, veterans, and people with disabilities. 

• Location and Community Impact: Projects that address needs for affordability in under-invested areas or areas of high demand in the urban or rural regions get prioritized. 

• Environmental Sustainability: Points are given when projects consider green building standards, energy-efficient design, or other accessibility-related features that promote Rhode Island’s commitment to sustainable growth. 

• Mixed-Income Models: Projects with affordable and market-rate units are often encouraged, focusing on creating economic diversity and avoiding housing segregation. 

 

Rhode Island LIHTC Affordability and Compliance Requirements 

Developers must reserve a portion of units allotted to households whose incomes fall within or below 60% of the Area Median Income (AMI) to get Rhode Island LIHTCs. Such affordable units are further limited by specified rent ceilings so that the tenant can afford the total rent and utilities. The affordability restriction shall be enforced for at least 30 years, although some developers opt for longer terms to bolster their applications.

 

Fully LIHTC-funded projects in good standing may file for an Abbreviated Annual Certification, a streamlined version of the annual certification that eases income verification. Rhode Island Housing conducts periodic inspections and audits to ensure that developments meet all income, rent, and physical condition standards. 

 

Rhode Island LIHTC Program Utility Allowances and Rent Calculation 

Rhode Island LIHTC employs the Housing Finance Agency (HFA) Utility Model, which is not commonly used by other LIHTC programs. This model allows the developer to adjust the rent amount appropriately because the tenants’ utility costs are considered in this model. The utility model distinguishes between such utilities as natural gas and electricity. The utility allowance varies with the project’s needs. These utility allowances won’t leave the tenants unprepared for any unexpected expenditure. Housing costs are made affordable within acceptable limits. 

Financial Structure of Rhode Island LIHTC Program 

Rhode Island LIHTCs are structured to ensure affordable housing projects are fiscally sound. Credits may be redeemed directly or sold to investors, who take them over 10 years. Developers can also redeem the credits at face value, 90% of which provides the developer with a source of liquid financing for the project.  

 

This way, developers can attain equity upfront, which pays for the high upfront housing construction or rehabilitation costs. Investors buying these credits secure a stake in affordable housing projects supporting community development. 

Legislative and State Budget Support for Rhode Island LIHTC Program 

The LIHTC program in Rhode Island gets strong legislative support and state budgets. Recent budget allocations, such as the increase in the FY24 budget, reflect Rhode Island’s commitment to increasing affordable housing stock. The funds are allocated toward new constructions and the preservation of existing affordable units, so the approach toward housing stability is holistic. The legislature of Rhode Island has also brought in incentives to boost development in high-need areas, including urban centers as well as rural communities where housing options are limited.

Rhode Island LIHTC Application Process 

The application process for Rhode Island LIHTCs is very competitive, particularly concerning the 9% credits. Proposals seeking these credits must be substantive and responsive to priorities presented in QAP and, therefore, project feasible. 

 

Rhode Island Housing examines each proposal using a scoring rubric within QAP. The most effective projects demonstrate high alignment with state goals, have the potential to significantly impact communities, and are viable over long periods.  

 

The review process includes a public comment period that involves the community and other stakeholders in the proposal development. Upon approval, the project is issued with the tax credit allocation necessary for its financial structuring. 

LIHTC Program Impact on Rhode Island’s Housing Landscape 

Since its inception, the Rhode Island LIHTC has played an instrumental role in opening doors for more affordable housing throughout the state. The LIHTC program has created thousands of apartments housing families, elders, and vulnerable segments. Projects to revive the state’s most underserved neighborhoods foster revitalized community energy, economic strength, and a future promise of having a roof over one’s head. 

 

More recent of these are ones explicitly dedicated to the following: 

 

• Housing for Seniors and Veterans: These specialized units aim to serve the elderly and veterans to meet the needs of Rhode Island’s aged population. 

• Mixed Use: These are affordable housing types combined with commercial or community facilities designed to support economic development. 

• Sustainable and Green Housing: Incorporating designs with energy-efficient features, renewable energy resources, or both to reduce environmental impacts and operational costs. 

LIHTC projects also contribute to Rhode Island’s economic health by providing construction jobs, local tax revenue, and investments in underserved areas, in addition to providing stable housing. 

Expansions of the LIHTC program in Rhode 

The housing crisis in Rhode Island is a cause for action by the legislature. Another expansion to the LIHTC program is also underway. Predicted changes include the following:

 

• More Budget Appointments: Alleviation of more powerful state funding to address surging affordable housing needs. 

• Extend the Compliance Period: Policies that should encourage developers to commit to longer affordability terms to offer stable housing options for future generations. 

• Improved Incentives for Targeted Populations: Programs that support affordable housing for families, people with disabilities, and those transitioning out of homelessness. 

• More Emphasis on Rural Development: The Rhode Island rural areas have various housing problems. The LIHTC program can focus on rural projects for all Rhode Islanders to achieve equal access to affordable housing. 

Conclusion 

The Low-Income Housing Tax Credit (LIHTC) program in Rhode Island is one of the cornerstones of the state’s affordable housing strategy, having a framework that aligns with federal guidelines and state-specific priorities. It provides tax credits to promote affordable housing development and preservation. It directly addresses Rhode Island’s housing crisis by supporting those in need while contributing to economic stability and community growth. 

 

By making sustainable, affordable housing available through consistent funding, targeted incentives, and rigorous compliance standards, the Rhode Island LIHTC program will shift with a changing state and play an increasingly important role in guaranteeing safe, affordable housing for all Rhode Islanders.