Report Highlights Funding Challenges for LIHTC Site Development

Report Highlights Funding Challenges for LIHTC Site Development



On average, developers needed to layer an average of 3.5 different funding sources to finance developments built between 2000 and 2018, according to a recent report published by the Terner Center for Housing Innovation at UC Berkeley. One in four sites layered at least five (and in some cases as many as 11) sources. The average number of sources has also increased over time, in line with the rise of development costs, according to the report, “The Complexity of Financing Low-Income Housing Tax Credit Housing.”

On average, developers needed to layer an average of 3.5 different funding sources to finance developments built between 2000 and 2018, according to a recent report published by the Terner Center for Housing Innovation at UC Berkeley. One in four sites layered at least five (and in some cases as many as 11) sources. The average number of sources has also increased over time, in line with the rise of development costs, according to the report, “The Complexity of Financing Low-Income Housing Tax Credit Housing.”

While it will take more than addressing financing complexity to curb LIHTC development costs, the authors recommend taking steps to streamline financing, cut down on administrative burdens, and speed time to closing deals to ensure the LIHTC program works as effectively as possible.

Align Requirements and Deadlines

The report encourages the federal government to play a leading role in efforts to better align requirements and deadlines across multiple funding programs administered by federal agencies. The federal government can also encourage states and localities to follow suit, offering resources and technical assistance to encourage the adoption of strategies that reduce funding complexity and the inefficiencies that arise from it.

The report recommends that, at minimum, states and localities work toward reducing the complexity that comes from differing timelines, levels of transparency, and requirements across different funding sources.

Consolidated Agency to Access Multiple Funding Sources

The report also recommends that one agency be in charge of allocating multiple programs. For example, when the entity responsible for allocating LIHTCs also administers soft sources of funding, applicants benefit from the fact that those sources are being coordinated by an agency that understands the requirements associated with LIHTC sites.

The report also points to consolidated applications as another way of streamlining the allocation of multiple sources administered by different entities. The extent to which consolidated applications can coordinate state-administered funding with local and/or philanthropic funding increases the ability to effectively layer multiple funding sources and avoid scenarios where projects receive LIHTCs but stall in moving forward because other funding sources don’t come through or take multiple cycles to secure.

Topics