Funding Affordable Housing
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The HOME ProgramThe HOME Investment Partnership Program provides grants to states and localities to fund a multitude of projects, including new construction, rehabilitation or acquisition of affordable housing developments, and homebuyer or rental assistance. It is the largest federal block grant dedicated to creating more affordable homes for low-income people.
The program was designed to be flexible so communities can apply the funds in a way that best meets their individual and unique needs. Not only can it easily be combined with other sources of funding, as illustrated here, it also requires participating jurisdictions to match 25% of HOME’s contribution to mobilize the community in support of affordable housing. The program also seeks to strengthen partnerships between all governmental levels and the private sector. It especially supports qualified community-based nonprofit housing groups, and therefore strengthens the effectiveness of these partners. |
Low Income Housing Tax CreditsLow Income Housing Tax Credits (LIHTC) are the most common source of funding for affordable housing. Since 1987, they have been applied to hundreds of housing units. They work by generating equity capital for the construction or rehabilitation of affordable rental housing, by providing the owner of the unit with a dollar-for-dollar tax credit for up to ten years.
Both for-profit and nonprofit developers are eligible for LIHTCs, however each state has its own implementation program. When a developer receives tax credits, they are required to operate the property as affordable for a minimum of fifteen years. However, some states will require longer periods, sometimes up to forty years. LIHTCs come as either nine percent or four percent credits. The higher rate is for developments not subsidized by the federal government, while the lower rate applies only to acquisition of existing buildings as well as federally subsidized new construction or rehabilitation. |