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Affordable Housing: Low Income Housing Tax Credits

January 29, 2019

Every year, several PM Environmental (PM) employees work diligently in the spring and fall to complete environmental site assessments associated with affordable housing developers submittal of applications for Low Income Housing Tax Credits (LIHTC) during competitive funding rounds through the Michigan State Housing Development Authority (MSHDA). 

According to MSHDA, Michigan’s LIHTC program was developed as part of the federal Tax Reform Act of 1986 and intended to increase and preserve affordable rental housing with a credit that is directly applicable against taxable income.  This program allows affordable housing investors who are awarded LIHTC credit to claim a credit against their tax liability annually for a period of 10 years.*

Awards are given out in five categories of housing and financially incentivize participants to construct, rehabilitate and operate rental housing for low income tenants. LIHTC awards a maximum of $1.5 million per project and a maximum of $3 million per Principal, or person or entity receiving a portion of the development fee.

LIHTC awards are extremely competitive and, according to MSHDA, the application process is designed with the intent of ensuring that affordable housing is available in areas of high opportunity.  Key elements MSHDA looks for in a project include:

  • Proximity to transportation
  • Proximity to amenities
  • Education, health and well-being, economic security, and jobs, goods, and services
  • Developments located within an Opportunity Zone and/or a Rising Tide Community
  • Developments near downtowns/corridors
  • Developments near an employment center
  • Neighborhood investment activity areas
  • Affordable/market rent differential
  • Mixed income development
  • Rural set-aside

Clients interested in applying for MSHDA funding must fill out an application detailing financial information and other supporting documentation.  Initial LIHTC applications must also include a Phase I Environmental Site Assessment (ESA) and if applicable, Noise and/or Radon Assessments.  A review of wetlands, floodplains, Electro-Magnetic Field (EMF), high-pressured gas lines, and VEC concerns are also part of the initial Phase I ESA review.  Those documents are then submitted to MSHDA for a final review and evaluation.

“If a project receives an initial LIHTC award, MSHDA will issue a Conditional Go Memorandum that describes additional MSHDA components needed,” said Carey Kratz, Regional Manager of Due Diligence at PM.  “This includes additional environmental review requirements such as suspect asbestos-containing material sampling and abatement, lead-based paint sampling and abatement, Phase II ESA/BEA/Due Care, asbestos and lead-based paint closeout requirements, noise attenuation, and radon mitigation.”

PM is a MSHDA Qualified Consultant and is prequalified to provide services such as Phase I and Phase II ESAs, Baseline Environmental Assessments (BEAs), Documentation of Due Care Compliance (DDCCs), peer-review services, lead-based paint assessments, asbestos inspections, and radon testing.  PM is also prequalified to write, prepare and submit specialized Environmental Assessments (EAs) and/or Statutory Checklist reports to MSHDA for the purposes of demonstrating compliance with the National Environmental Policy Act (NEPA).

“We typically work on close to half of the applications that are submitted to MSHDA each round,” said Jackie Shafer, Regional Manager of Due Diligence at PM. “In MSHDA’s October 2018 round, PM assisted on more than 16 of the submitted applications with five being awarded funding.”

Ms. Kratz and Ms. Schafer both spearhead PM’s MSHDA application process with a combined 23 years of experience between them. Ms. Kratz joined PM in November 2018 and as Regional Manager of Due Diligence she oversee's PM's Metro Detroit region. Ms. Schafer was promoted to Regional Manager of Due Diligence in October 2018 and oversee's PM's midwest Due Diligence group, excluding the 11 counties making up greater Metro Detroit.

Submittals for the 1st round of competitive LIHTC funding are due to MSHDA by close of business on April 1, 2019.  The Phase I ESA and Noise Assessment typically require four to five week to prepare.  You can contact Ms. Kratz or Ms. Schafer for additional information or to request a proposal.  

 

* https://www.michigan.gov/mshda/