Tribes Taking Advantage of LIHTC Opportunities

More tribes are successfully completing Low-Income Housing Tax Credit (LIHTC) projects around the country; however the number of tribes participating is still relatively small. "While the funding could be useful to tribes, many tribes remain either unaware of the program or might be wary of its regulations and need for extensive partnerships," stated Pattye Green. Ms. Green is the Director for Native American Initiatives, Housing and Community Development for Fannie Mae. "Fannie Mae is very encouraged about the partnership with NAIHC and the Raymond James Tax Credit Fund. We are committed to the support of Native American housing needs and utilizing LIHTC is an important opportunity for tribes to consider," said Green.

LIHTC is an IRS program, administered by each state, to finance the development of affordable rental housing for low-income households. Federal housing tax credits are awarded to developers of qualified projects. Developers sell these credits to investors to raise capital for their projects, which reduces the developer’s debt. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents, according to the Housing and Urban Development Department (HUD).

If the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their Federal tax liability each year over a period of 10 years. Once an LIHTC application is approved, the housing authority will be in a 15-year marriage with the project. Homes must be kept in good condition, and must be rented to eligible tenants, among other requirements.

LIHTCs can be used for a variety of developments, from single- to multi-family housing projects to elderly housing. Mobile homes are not eligible for the program, but stick-built and good quality manufactured houses are eligible. Community "amenities" such as fire or police substation, or any non-commercial community service, such as a playground, may also be eligible.

Raymond James Working in Indian Country

Raymond James Tax Credit Funds, Inc. (RJTCF) has worked with 33 different tribes and tribal housing authorities across 13 states. "We made an investment commitment of about $250 million to build and renovate 2,500 homes with tribes." said James Horvick, Vice President and Director of Acquisitions for RJTCF. "It is something we have been very committed to and continue to be."

RJTCF is a "syndicator" of tax credits, investing in partnerships on behalf of its corporate clients. Any tribe with a substantial number of low-income members (up to 60% of area median) with on or off reservation housing needs, should consider federal housing tax credit financing, according to their website.

"Overall about 45 tribes have done tax credit projects, with an investment of $325 million," Horvick said. While this number is impressive, it is relatively small in comparison to the fact that there are 562 tribes and the program has been around for more than 20 years.

"In general, I think some tribes are reluctant to try a program and be the guinea pig, so to speak," Horvick said. "However, when one tribe does it and is successful, others want to emulate that."

Red Lake Housing Authority in Minnesota and Standing Rock Housing Authority in North and South Dakota have been the leaders nationally, and have built or renovated 600 homes using tax credits and have investment commitments of $60 million, Horvick said. Other tribes in Minnesota and South Dakota are also succeeding and as states have seen these successes they have gotten more receptive to tribal participation

"Each state runs the LIHTC program differently and it takes the first tribe in that state to do it and be successful. So it is really about breaking down of barriers and reducing hurdles," Horvick said.

Leveraging tax credits with other programs is a route some tribes are choosing to take. The Salish and Kootenai Housing Authority in Montana and the Northern Arapaho Tribal Housing authority in Wyoming both recently combined LIHTC with private and federal monies to build affordable housing.

Being Aware of Challenges

The LIHTC program does have its challenges. It is designed to leverage funds on construction and reduce cost for tribes to build homes, but does not provide operating subsidies, Horvick said. Tribes must collect sufficient rents, which can be difficult for low-income residents, or leverage other funds.

Additionally, when tribes use tax credits they are bringing different stakeholders into the fold: investors, a state agency and the IRS. These stakeholders stay involved over a long time period, and because they are taking the financial risk, this can lead to a higher level of scrutiny. This can result in different rules imposed on tenants that they may not be use to from their housing authority. Some tribes may need to tweak their maintenance and inspection policies to comply with LIHTC requirements.

"However, if everyone’s goal is to provide safe and decent housing, that shouldn’t be a barrier," Horvick said. The key is to educate yourself before getting involved and go into a project with your eyes open, he added.

Tribal sovereignty is also an important issue for housing authorities and their tribes. Typically RJTCF enters into an agreement with a limited waiver of sovereignty. If there were ever a conflict that could not be worked out through mediation, binding arbitration would be enforced in tribal court, not state court.

Getting More Information

RJTCF provides free in-person training to housing authorities, and is willing to work around their schedule. Horvick also recommends that tribal housing authorities talk to their state LIHTC agency, which would be allocating the credits. "This is critically important; states want to feel that they understand your project," Horvick said. "If you build a relationship, the state will want to advocate for you on the project."

Horvick also recommends talking with other tribes who have done tax credits. "Ask: how did they go about doing this? What would they have done differently? So you can avoid mistakes others have made and get peer-to-peer mentoring," Horvick said. "I can explain things, but [I don’t] do the day-to-day job of housing. An executive director knows how to get board support and manage tenants."

It is becoming more important every day to look at funding alternatives for housing, Horvick said. NAHASDA allocations have remained flat for several years and "the only way to meet housing needs is to leverage funds," Horvick said. While LIHTC is not the only program out there it is "the best bang for your buck and every tribe owes themselves to look and see if it is right for them."

By Kimberly Hayes

Contact: James Horvick, RJTC, (800) 438-8088, e-mail: ; Web: www.rjtcf.com; HUD: www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc/basics/

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