Governor’s Office of Faith-Based Community Development Services A good place to start is with the appropriate state agency for some guidance through the state- funding process. Karim Camara with NY State notes that they typically ask about the capacity to finish the project. And the best way to determine that, notes Camara, is an assembled team that has completed such projects in the past, particularly with state involvement.
Importantly, some states do have money. In New York, the governor has recently committed $20 billion to affordable housing development and homelessness.
Finally, know that the state has a very formal unified funding process. Camara cautions, “Plan ahead and make sure you don’t think, ‘Okay, I’ve got this property and I want financing next week!’ Think in terms of a likely two-to three-year plan.” NYC Department of Housing Preservation & Development In New York, there is city money available with an annual capital budget for housing, (probably one of the largest in the country), that has increased from $1.3 billion annually to $1.9 billion. The city needs to ascertain that the proper team is in place to finance faith-based projects. There are many factors that impact how the money is spent. These include construction costs, which continue to rise, as well as the future of tax credits (addressed later in document). In short, cities have resources, and it behooves partners to look into what’s available.
5. Learn common pitfalls and how to avoid them
Deficient developer fee information It is incumbent upon the team to ask the right questions to determine the development fee and how it will be paid. Due to changes in tax law, a lot of developers are changing the way they take fees, with many looking for “carried interest” vs. actual upfront fee. This affects the future of a property. To the extent that there’s a refinancing or sale down the road, carried interest allows developers to receive capital gain treatments. It’s also important to know your balance sheet when calculating the risk associated with the guarantees being made. Some faith-based organizations have stronger financial statements than others so it pays (literally) to know. Lack of appropriate expertise and leadership The pastor or other religious leader may not be the best candidate to lead the housing effort. In fact, many recommend appointing someone else within the organization, less emotionally involved, and perhaps with some experience and time to oversee the effort. Misunderstanding tax law Tax code is extremely complicated, and experts have to stay up-to-date on changes. For example, recent changes to the tax code have created a situation where the very productive existing (LIHTC) low income housing tax credits of 4% and 9% are now worth less since the corporate tax rate was cut from 35% at the top to 21%. Investors in the LIHTC now pay less for each dollar of credit because the net after tax benefit is worth a little bit less to them, necessitating more creative ways to close funding gaps. These include additional city or state subsidies as well as the NMTC (new market tax credit). Allocated by the federal government, it resembles the LIHTC, but with key differences. Qualified intermediaries are allocated NMTC from the government then sub-allocate the credits to community businesses in low income areas. The 39% credit, allocated over seven years, doesn’t support housing per se, but can be used to support a new supermarket on the ground floor of an affordable housing building in a low income area.
Putting Faith in Housing: A Primer for All Partners
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