Biggest Change for Affordable Housing is LIHTC Drying Up

While real estate in general has languished

While real estate in general has languished, affordable housing in Georgia saw an uptick in transactions at the end of 2009.  Jeff Adams, an affordable housing attorney at Arnall Golden Gregory in Atlanta, closed three deals late last year. The 300-unit Baptist Towers in Atlanta, an older senior housing complex built in 1970 and others included affordable housing complexes in Dublin, Ga., and Cordele, Ga.

Adams has been practicing law in the affordable housing for the last 10 years and seen quite a few good and bad times. He talks to MHN about how federal stimulus money has helped keep many projects afloat and why the affordable housing sector is still quite active.

MHN: Why do you think affordable housing is doing well in Georgia?

Adams: We closed a lot of deals, specifically at the end of last year because of the federal stimulus money coming in. The federal stimulus law included several provisions for what we call workforce housing or affordable housing. Two big provisions that impact this sector are Section 1602, which is the tax credit exchange, and TCap, which is the Tax Credit Assistance Program. Every state is eligible for these federal monies and Georgia is leading in utilizing these funds pretty quickly. In doing so, important deals were able to close and construction began, which would not have been possible without the stimuls money.

We closed on various pieces of financing to do rehab on The Baptist Towers and the result is a nice property. We got positive results. Most people think its nothing but bad news for commercial real estate but that is really not the case, at least in affordable housing.

MHN: How much of the stimulus money has already been utilized in George?

Adams: In Georgia, I would say at least 75 percent of the federal funds allocated to the state have been used or designated to projects. A common complaint about the stimulus money is that no one knows where it went. This is a good example of how the money has been put to good use.

MHN: Is there anything left for 2010 and what happens when it runs out?

Adams: There is still some money for 2010, but when the funds run out, there will be some uncertainty as to how many of these deals will be funded. We are starting to see some interest from the usual financiers and there is also an indication that Congress might extend the federal stimulus package.

MHN: What is the importance of affordable housing in these time?

Adams: Affordable housing is very important in these times of unemployment and foreclosures, which is rendering a lot of people homeless. In addition, the construction jobs are putting several people to work.

MHN: Need for affordable housing is very high right now. Can you expand on this?

Adams: In 2009, even with the stimulus money, there were fewer units coming online and in the coming years, there will be a bigger glut and greater need for affordable rental housing. I say affordable rental in specific because the period of people getting mortgages easily is over and is not coming back. When the jobs start to come back, there will be a need for affordable rental housing and it is a challenge that many states will face.

MHN: What is the biggest change you have seen in affordable housing in the last 10 years that you have been part of the sector?

Adams: The biggest change in affordable housing since I have been practicing law in this sector has taken place in the last couple of years. The primary vehicle for all affordable housing: the Low Income Housing Tax Credits program (LIHTC), which is the investor market for buying those credits has really tightened up. When companies are not generating enough revenue, they don’t need to buy tax credits to offset them.

Another change is that the GSEs, which are a major source of financing for affordable housing (they provided about 50 percent of the credit) are in a really bad financial shape right now. Due to this, there is almost a complete shutdown of financing coming from them.

When the economy went south in 2008 the tax credit investor market dried up and many projects were stalled. The stimulus money got some of them going but as the stimulus gets over, the big question is whether interest in the tax credit investor market come back.

MHN: Why do you like being part of the affordable housing sector?

Adams: It’s very difficult to get financing for affordable housing projects and there is a lot of work that goes into getting all the pieces of financing together, but the end result is something that is very positive and beneficial to the community and that makes it special.