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Utah Housing Corporation recently announced awards of its 2013 round of competition for federal Low Income Housing Tax Credits (LIHTC). As the administrator of the LIHTC program for the State of Utah, Utah Housing received applications for 24 proposed projects, requesting a total of $11,624,000 in annual housing credits. Awards were made to 14 projects and will include developments in Moab, Sandy, Draper, Salt Lake City, Murray, Ogden, Pleasant View, Provo, Beaver, and Roosevelt. The winning projects range in size from four to 119 rental units, representing both newly constructed and existing, to-be-refurbished buildings. The rental units will provide affordable housing for seniors, veterans, refugees, and working families and individuals unable to afford market rate rents. Awards totaled more than $6.1 million of annual credits allocated to Utah by the US Department of the Treasury.
Under the LIHTC program, annual tax credits are awarded to proposed developments for each year of a ten-year credit period. The ten year stream of annual credits is then purchased by investors for cash invested as equity into the housing developments. By awarding approximately $6.1 million of annual tax credits, the sale of those credits to investors will net over $59,000,000 of equity for these 14 developments. The large amount of equity raised for a project allows the developer to obtain a much smaller mortgage, and permits the rents to be significantly lower than a project with a high amount of mortgage debt.
Yet that is not the full extent of the economic benefits. Jim Wood, director of the Bureau of Economic and Business Research at the University of Utah, indicated that the overall economic impact is much greater. Said Wood, “Typically a million dollars in new residential construction activity generates approximately 24 total jobs in Utah. The projects receiving 2013 LIHTC will create about $70,000,000 in construction activity, producing well over 1,600 jobs during the construction period. And what’s exciting is that as long as the LIHTC program continues, a similar level of new construction and job impacts will be generated each year. It is also very important to note that without the LIHTC program these job impacts and the construction activity would not otherwise occur.”
Grant S. Whitaker, president and CEO of Utah Housing, agreed. “Every year the LIHTC program leverages millions of dollars of private resources for the development of affordable rental housing. The program not only creates affordable housing for lower income Utahns, it creates construction and real estate jobs, and paychecks that are spent locally. In addition, the local and state tax base is enhanced. This program is a powerful economic engine for Utah.”
The winning projects are expected to begin construction this year.