Big Bank Losses Mean Less Affordable Housing Project Funding in Boston
- Jun 18, 2008
Boston–The rocky financial market is reducing funding for affordable apartment construction in the Boston area, according to the Boston Globe.As a result, costs for some low-rent apartment projects are increasing–and other projects are being canceled.Affordable housing construction is funded largely through a credit given to developers that cuts taxable income by a certain amount; the credit can be sold to banks or other companies to raise money. But because the value of the tax-forgiveness credits that the federal government allows developers to sell to raise funds has declined, construction money is tight. A year ago, a $1 reduction sold for about $1, according to the Globe; now, buyers often won’t pay more than $0.90 cents.The difference can add up. On a $10 million project, the loss can cause a deficit of $1 million or more in funding.”The bottom line is less affordable housing,” said Jon Rudzinski of Winn Development, a Boston-based company that frequently funds projects by selling tax credits. “If the pricing of tax credits goes down by 10 percent, I would venture to say that the number of (new) affordable units also goes down by 10 percent.”Tax credit prices have fallen because demand has also declined. Financial companies–such as Bank of America Corp., Fannie Mae and Freddie Mac–are the biggest credit buyers, but many currently are posting losses and don’t have a need for tax credits, the Globe said.