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Colorado Revives LIHTC Program, Plans to Direct Funds to Flood-Affected Areas

Published by Jennifer Dockery on Tuesday, July 1, 2014

Journal cover July 2014   Download PDF

After more than a decade, the state of Colorado once again has a state low-income housing tax credit (LIHTC) program. The first time around, Colorado’s LIHTC supported the development of more than 800 affordable housing units. In its second incarnation, affordable housing stakeholders hope to surpass that number and use the credit as a tool for recovery in flood-ravaged areas.

“There’s a great need for more affordable housing in the state of Colorado,” said state Rep. Crisanta Duran, D-Denver. “The tax credit idea was a tool that was raised. I’m very excited we got it through the legislature. This will be a tool that can be effectively used for recovery.”

Rep. Duran, along with state Sen. Jessie Ulibarri, D-Commerce City, introduced the LIHTC program as part of House Bill (H.B.) 1017. The legislation includes changes to a housing investment trust fund and housing development grant fund along with the LIHTC program.

H.B. 1017 authorizes a LIHTC program for two years: 2015 and 2016. It provides a credit equal to 30 percent of a property’s qualified basis. The credit is claimed over six years, but can be carried forward for 11 years. The program is capped at $10 million, with $5 million being available each year.

Colorado Housing and Finance Authority (CHFA) and others worked with the legislators to craft a bill that would benefit the greatest number of people and attract the most private sector investment to properties. The state credit has been bifurcated from the federal credit, enabling developers who receive both credits to find different investors for the state and federal credits. Under the law, properties do not need to receive federal LIHTCs to qualify for the credits, however.

“Bifurcating the credit allows developers to take full advantage of that funding,” said Jeff Nishita of Novogradac & Company. Nishita served as a consultant to CHFA and Novogradac’s director of public policy and government affairs, Peter Lawrence, testified on behalf of the credit.

The law sets guidelines for the credits, but it does not provide an allocation plan. CHFA will set the award criteria in its 2015 qualified allocation plan. The credits will be awarded through a competitive process similar to that of the federal 9 percent LIHTC, said Natasha Weaver, CHFA’s tax credit program manager.

This is Colorado’s second LIHTC. The state had a temporary tax credit program in 2001 and 2002 that authorized $10 million in credits. That program funded seven affordable housing developments, creating or preserving 840 rental units. Sale of the credits generated more than $20 million in private equity. Weaver and Jerilynn Martinez, CHFA’s marketing and communications manager, said that it was too early to speculate on how many units would be created or preserved under the new program, but they anticipate similar results.

“The success of the program was very clear and was instrumental in getting it renewed this time,” Martinez said.

Sara Reynolds, executive director of Housing Colorado, a statewide affordable housing industry advocate, sees the credit as a way to provide homes to some of the estimated 140,000 households in Colorado who lack affordable housing. Housing Colorado estimates that to begin to meet that need would require $35 million in public investment each year for the next 10 years. Reynolds said that adding a state tax credit increases the collective impact of the state and federal funding.

“It becomes less daunting. Those efforts are really contributing to a bigger picture to address need in the state. [The credit] is such a practical solution. Every step we take starts to fill that gap,” Reynolds said.

The 2015-2016 program has the opportunity to create more units, however, because allocations of tax credits to properties in counties that the QAP designates as having been affected by a natural disaster are not included in the program cap. In 2013, Colorado experienced severe flooding in more than a dozen counties. CHFA plans to use the state LIHTCs to address a lack of affordable housing that was exacerbated by the flooding.

“We think this is an opportunity to pull together and be creative,” said Weaver of using the funding to build housing in the affected counties.

At press time, CHFA was developing program rules and application materials. Weaver said that the program would be competitive and that the application process would most likely be similar to the 9 percent federal LIHTC application. She added that CHFA would be seeking public input during the process. CHFA will be participating in Housing Colorado’s summer outreach program, which will include meetings with affordable housing stakeholders. Reynolds said that those meetings will provide opportunities for discussion about the program. “Everyone is going to have the opportunity to hear straight from the source,” Reynolds said.

CHFA will also be providing written reports to the general assembly and public each year. The reports must specify the number of developments and total number of units in each development, the geographic location and household type, resident demographics and rents. The report must also show how the properties that received the credits are addressing the need for affordable housing in their communities.

A copy of H.B. 1017 can be found online at www.taxcredithousing.com.

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