Feature Illustration (above): The Miramonte Single Living project is one of two residential components in a Fort Bend community that are being developed by M|Group Holdings Inc. with tax credits. — NOTE: This article was updated Aug. 1, 2018 to include official comments from a TDHCA press release.
by Adolfo Pesquera
Austin (Travis County) – Seventy-two multifamily housing projects were approved Thursday for 9 percent housing tax credits by the Texas Department of Housing and Community Affairs Governing Board.
The 72 projects represent 6,535 apartment units that can be constructed in communities throughout Texas. The majority, 5,557 units, will be affordable to low income families.
The 9 percent housing tax credits are relied upon by multifamily housing developers to secure underwriting that will allow for a majority of the units in a given project to be rented at 60 percent or less of the area median family income.
For example, M|Group Holdings Inc. is developing Miramonte, a 124-unit complex in Fort Bend County. Land acquisition and construction costs total $12,210,520. Including financing and other soft costs the total project cost is $18,846,328.
Elevation and site plan Miramonte in Fort Bend, by M|Group Holdings Inc. Courtesy of TDHCA.
The $1,286,253 housing tax credit M|Group received is to investors an annual amount over the life of the loan. Wells Fargo, the developer’s lender, gave an offer proposing “preliminary pricing of $0.94 per LIHTC (low income housing tax credit) to purchase 99.98% interest in the limited partnership that will own and operate the project, which amounts to total capital contributions of $12,088,360.”
The credits are generally designed to cover approximately 70 percent of each property’s eligible development costs. In the case of Miramonte, the tax credit accounted for about two-thirds of the development cost’s funding:
- Wells Fargo conventional loan $ 6,000,000
- 9% HTC of $1,286,253 $12,088,360
- Fort Bend Housing Finance Corp. $ 500
- Deferred developer fee $ 757,468
- Total Sources of Funds $18,846,328
This year, 138 applications were submitted. By July, they were reduced to 120 applications requesting $137 million in credits. But the annual allocation of credits is capped at $76,677,700. The total annual allocation represents a 12 percent increase over the 2017, the TDHCA said.
The credits are expected to help finance the building of 64 high quality, new properties with a total of 4,997 units, and the rehabilitation of eight properties offering 560 units to income-eligible households across the state. The at-risk set aside, totaling more than $11.5 million for the 2018 cycle, is used for the rehabilitation or reconstruction of aging housing developments that could soon lose rental subsidies provided to their low income residents.
“This year, every eligible at-risk application we received will be awarded their requested tax credits,” explained Marni Holloway, TDHCA director of multifamily finance. “Because of this, TDHCA’s efforts will go deeper into rural regions than previous award cycles and help preserve housing affordability for some of our most vulnerable Texans.”
Some projects made it through with conditions. For instance, Star of Texas Seniors, a 32-unit elderly housing project in Montgomery, was contingent on receiving a multifamily zoning.
TDHCA staff recommended to the board of directors that it be removed by reducing its score (and thus its ranking) because the Montgomery City Council on Tuesday denied the zoning change and it was unlikely that issue would be resolved anytime soon.
However, the TDHCA board argued that Star of Texas Seniors had a right to appeal before its score is reduced and allowed it to stay on the awards list.
Developers that specialize in tax credit projects begin the application process the preceding year and must have their packages submitted by early spring. This includes information on the development team, financing, demographics for the project neighborhood and preliminary architectural schematics.
With the July 26 decision, developers can go forward with closings on the lending contracts and instruct their architects to proceed with final construction documents. The projects typically reach the construction phase late in the fourth quarter or sometime in the first quarter of the following year.
The majority of applications that do not make the list get put on a waitlist. If for some reason, projects from the awarded list do not move forward, projects on the waitlist with the highest scores are in line to receive a tax credit award.
The 9 percent tax credit program is national, and there is a national pool. A second way that projects on the waitlist can move up is if credits are freed up at the end of the calendar year from that pool.
Tax credits are divided into thirteen regions and further divided by region into “Urban” and “Rural.” In addition, some tax credits are reserved for counties where there is an extreme need; this group is referred to as the “At-Risk Set-Aside.”
This year, six of the projects that received At-Risk Set-Aside status were in counties that suffered heavy flooding due to Hurricane Harvey:
Project Name County #Units 9% HTC Award
- Sweetwater Apts Hardin 24 $266,484
- Orchid Circle Homes & San Patricio 58 $700,000
- Dayton Retirement Cntr Liberty 48 $279,322
- Sandstone Foothills Apts Palo Pinto 40 $458,783
- Park Forest Liberty 56 $458,047
- Groveton Seniors Trinity 32 $298,953
- Poinsettia Gardens @ Cameron 150 $2,000,000
- Sweetbriar Hills Apts Jasper 60 $550,735
- Memorial Apts II Hidalgo 246 $1,915,000
Region 3, which includes Dallas-Fort Worth Metroplex, received the largest portion with almost $15.3 million in tax credits on ten urban projects and two rural projects.
Region 6, which includes the Houston area, followed with more than $13.8 million in tax credits on nine urban projects and one rural. These do not include the At-Risk Set-Asides.
Somerset Lofts at 8506 Hempstead Road in Houston is a DWR Development project. Courtesy: TDHCA.
Region 11, the Lower Rio Grande Valley, received more than $8.7 million in tax credits for five urban and two rural projects.
Region 7 (Austin MSA) and Region 9 (San Antonio MSA) each received about $6 million, with five projects awarded in the Austin area and six in the San Antonio area.
Village at Roosevelt is one of several San Antonio area affordable housing projects approved by the TDHCA.