Innovative financing packages utilizing Low Income Housing Tax Credit program equity are at the forefront of affordable senior housing success stories. In this “Expert Opinion,” Deborah Burkart explains this program.
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Deborah Burkart, Vice President and National Director for Supportive Housing and Assisted Living for the National Equity Fund, has extensive experience in special needs housing initiatives. Ms. Burkart works nationally on affordable senior housing projects utilizing Low Income Housing Tax Credits for NEF, one of the nation’s largest non-profit equity funds. Ms. Burkart has been a frequent speaker at conferences sponsored by AAHSA, the National Council of State Housing Agencies and the Assisted Living Federation of America. She is a member of AAHSA’s Affordable Housing Cabinet and a board member of Heartland Housing, Inc., a Chicago-based, non-profit developer of affordable housing in the Midwest.
Deborah Burkart, Vice President,
National Director for Supportive Housing and Assisted Living
National Equity Fund, Inc.
1055 Wilshire Boulevard, Suite 1600
Los Angeles, CA 90017
Phone: (213) 250-0024
Read the interview transcript:
Kate Upson, Director of Broadcasting for Irving Levin Associates, talked to Deborah Burkart about why Low Income Housing Tax Credit program equity is such a successful tool in creating affordable senior housing.
Welcome to Expert Opinion, a Conversation with Deborah Burkart. Debbie is Vice President and National Director of Supportive Housing and Assisted Living for the National Equity Fund, one of the largest, non-profit equity funds in the country.
Her expertise is in helping providers utilize low income housing tax credit equity to create and preserve housing for the low-income elderly. She will be a panelist in our July 25th audio conference on affordable senior housing and today gives us a preview.
Debbie, can you please summarize the Low Income Housing Tax Credit Program and how it works?
Well, Congress created the tax credit program in 1986 and it’s been the most successful housing production program that ever came out of Washington, D.C. It’s not a HUD program, but it’s an IRS tax incentive program. And also the longest section of the IRS code, Section 42.
Congress created the tax credit program to encourage the construction and rehab of apartments affordable to low-income families and seniors and that’s by offering a credit or a reduction in tax liability for 10 years for the owners or developers of such housing. Your audience may be surprised to learn that the housing credit has helped finance 1.9 million apartments for low-income families since Congress created it in 1986. The housing credit helps finance 140,000 more apartments each year.
Why has this program been so successful?
Well, tax credits have been successful as a production program because each state sets its own housing priorities for this pot of money, not the federal government. Now, the housing credits are allocated by states under a plan. The state develops a plan to evaluate competing apartment developments against their own state and local housing needs.
How can these funds help create and preserve affordable senior housing?
Tax credits are a wonderful tool because they’re a very flexible source of financing. First, tax credit equity is paid in as equity and it doesn’t have to be repaid to the investors if certain conditions are met under the Low Income Housing Tax Credit Program over the 15-year tax credit partnership life.
Another reason is that tax credits have generated 50% or more of total development costs. Remember, this is equity, not debt, so there’s no debt service to be paid. That allows rents to stay low.
What role does the syndicator play in moving these projects forward?
Well, the developer needs to sell the tax credits to investors, usually institutional investors. And the tax credit syndicator matches up the developer with the investor. We help the developer understand the rules and the regulations of Section 42 and then, for the investors, we help them watch their investment and make sure the project stays in compliance with those rules. This is all done through what’s called a limited partnership. The developer comes in as a general partner and manages the day-to-day operations. And then the buyer of the tax credits are the limited partners and, through this partnership, they receive the share of the tax credit, tax losses and some minimum cash flow.
Are there opportunities for both not-for-profit and for-profit developers?
Oh, definitely. We’ve done a lot of projects across the country with not-for-profits as well as for-profit organizations. And frequently we see joint ventures between both parties so they can access a broader range of resources. One project I’m going to use as an example in our conference is Fairmont Commons in Pittsburgh. It is 60 units of elderly housing that’s particularly innovative because it was replacing housing, replacement public housing for area seniors with onsite services. And then on the first floor, there’s 7,000 square feet of retail space that was built in order to spur development along the Penn Avenue Arts Corridor.
Well, we’ll look forward to learning more about that and other ways that low income housing tax credits can be used to create affordable senior housing and the innovative partnerships that can be explored. To learn more about this, I encourage our listeners to join our audio conference on Wednesday, July 25th. You can register online. And we thank Debbie Burkart for participating in our Expert Opinion.
Recorded June 13, 2007