Affordable Housing – Page 2 – New Markets Tax Credit, Historic Tax Credits, and Affordable Housing

The New Jersey Urban Transit Tax Credit Program provides an average incentive to a company of $167,000 for every job created in or saved from leaving the state. The tax credit is for projects of $50 million or more within a half mile to one mile radius of transportation centers in nine cities such as Camden, Newark, Jersey City, Hoboken, Elizabeth, Paterson, East Orange and Trenton. The development’s “multiplier effect” of new employment and commerce must generate 10% more in new tax revenue than the amount of the tax credit. Residential projects do not have to have the same job creation effect, but they also do not qualify for as generous a subsidy.

The program started small, with state officials estimating that only a few businesses would qualify, but it has expanded into the state’s most important business incentive program. Since 2010, 18 residential, commercial and mixed-use projects have been awarded $977 million under the program. The recipients have pledged to invest $2.1 billion, create 2,910 jobs and retain 2,935 others deemed at risk of moving out of state.

The use of tax-exempt volume cap bonds to finance apartment complexes not only lowers the cost of financing but also provides an opportunity to generate tax credit equity with respect to the required minimum of 20% of the units available for low and moderate income tenants. The use of the 80/20 tax-exempt bond structure to generate tax credit has long been popular for projects in New York City, and should be considered in any apartment project financed with volume cap tax-exempt bonds. In a nutshell, a residential rental project with at least 50% of the cost of land and improvements financed with volume cap tax-exempt bonds is eligible for 4% federal low-income housing tax credits outside of the competitive 9% allocation process of the state housing finance agency. In exchange for the 4% federal tax credits, a rental limitation is imposed in addition to the income limitation imposed by the tax-exempt bond program, and the units which generate the 4% tax credits are income and rent restricted for 30 years rather than the income limitation terminating upon the repayment of the bonds. In addition, it is possible to procure 9% federal low-income tax credits through the competitive allocation process for the required 20% low and moderate income units.

Category: Affordable Housing

New Jersey’s Urban Transit Tax Credit Program Provides Job Incentive

4% Housing Tax Credits in 80/20 Tax-Exempt Bond Transactions