Each year, the Ohio Housing Finance Agency (OHFA) provides conditional commitments for the 9% Low-Income Housing Tax Credits or the Housing Credit. This is one of the key programs the Agency uses to create and preserve affordable housing throughout Ohio.
Created by Congress and the Reagan administration in 1986, this federal resource creates and preserves affordable rental housing, and it is the largest multifamily affordable housing development program in the country. The IRS, through one very large part of the Internal Revenue Code called Section 42, sets the requirements for the Housing Credit and then delegates the responsibility for administering the program to the states through their Housing Finance Agencies, like OHFA. There are two types of Housing Credits, the 9% "competitive credit" and the 4% "bond credit," but this blog focuses on the 9% process.
Section 42 requires states to develop a Qualified Allocation Plan (QAP) to set the state's priorities for affordable rental housing development and establish application and scoring criteria that private developers can follow to apply for 9% Housing Credits. Demand for this resource always exceeds the supply of Housing Credits made available to the state which, generally, results in only one-third of the total applications submitted being funded each year. Successful applicants who receive an allocation of Housing Credits then seek out additional business partners to provide equity investments in return for receiving the benefits of the Housing Credit, which will reduce the investors' federal income tax liability for 10 years.
Each May, OHFA announces its conditional commitments for the 9% Housing Credits. A list of this year's recipients can be found on the website along with the recipients from previous years.
But before the Housing Credits can be claimed, property construction needs to be completed, all federal requirements need to be met, and income-qualified residents paying affordable rents need to be moving in. Then the investors enter a 15-year compliance period where the benefits they receive from the Housing Credit can be recaptured by the IRS for noncompliance. Along with oversight from OHFA, this results in multiple levels of accountability.
The coordination among the federal government, providing a valuable resource to the state; organizations like OHFA, administering the program; and private sector developers and investors, providing additional funding, is an example of how a public-private partnership can create new affordable multifamily housing and preserve existing affordable rental housing.