With the rapid rise in residential rental rates over the past several years, the availability of affordable housing has become a critical issue. Despite broad support for building more affordable units, delivering them has proven to be a complex and multi-faceted challenge.Before diving into the obstacles developers face, it’s important to define key terms commonly used in the affordable housing space:“Affordable” housingWhen we think of affordable housing, we usually refer to projects developed with the assistance of government-sponsored financing programs. These programs require that a certain percentage of the units be affordable to low-income households for a set period of time (typically 30 years). There are two primary programs aiding the development of affordable housing in this manner.4% Low-Income Housing Tax Credit (LIHTC) Bond Financing Program. This program allows developers to use tax-exempt bonds to finance at least 50% of a project’s costs. By doing so, the project becomes eligible for 4% LIHTCs, which can be sold to investors in exchange for equity. These tax credits help developers offset federal income tax liabilities, making projects more financially viable. Units funded by the 4% credits must be affordable to households earning 60% or less of the area median income (AMI) for at least 30 years.9% LIHTC Program in Arizona. The financial mechanics of the 9% program are similar to the 4% program, but unlike the 4% program, the 9% program is competitive, with credits allocated by the Arizona Department of Housing (ADOH). Projects are scored on criteria such as loc …
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