low income housing credit - Posted by david s

Posted by Nate(DC) on April 23, 2002 at 16:20:15:

This, actually, could possibly work. I need you to email me off the board as we would need to get more in depth than anyone needs to see here.

(Take out the NOSPAM)

I’ll look forward to hearing from you.


low income housing credit - Posted by david s

Posted by david s on April 20, 2002 at 16:54:12:

I may have a good deal on a cluster of duplexes, about half of which are sec. 8 rented. Does anyone know what constitutes “low income housing” in order to qualify for an income tax credit under existing tax law?

Re: low income housing credit - Posted by Nate(DC)

Posted by Nate(DC) on April 21, 2002 at 15:45:20:


Feel free to email me off-board if you need more info on this program, as I work with it extensively.

Briefly, I can tell you that:

  1. How many is “a cluster”? I am assuming this is under 20 units. For a project that size, it’s PROBABLY not worth your time to mess around with tax credits. There are some exceptions but not many.

  2. You can get a credit for two eligible activities: BUYING low income housing or BUILDING/RENOVATING it.

If you want to get a credit for BUYING existing housing, there are a number of conditions. Probably the most important is that the current owner has to have owned the property for a minimum of 10 years and cannot have done any rehab during the past 10 yrs. If that is not the case, in nearly all cases you CANNOT get a credit for buying an existing building.

Doesn’t apply as these are existing units.

You can get a credit based on the costs incurred in the renovations. I don’t know what state you’re in. Some states’ programs heavily favor new construction and it is difficult to get credits for a rehab deal. In any case you will have to do a “substantial rehab” (there are dollar amount minimums per unit, and also a minimum percentage of your basis in the property, that must be met, to qualify) to get credits.

  1. Each state runs its own allocation process (even though it’s a federal tax credit program) and most states have one alloction round per year. In order to claim the credit, it must be allocated to you by the state agency, and in order to get an allocation, you must follow the state’s rules and submit during their appication cycle. This is important because many states’ application deadlines for 2002 have already passed. For example, Tennessee applications were due April 1. That means if you are in Tennessee, you could not apply for credits for about 11 months from now. Would the seller want to wait 11 months to consummate the deal? Most do not, and you cannot apply for credits for something that has already occurred.

If you have more details about the deal feel free to either email me or post on the board and I can give you some more concrete thoughts. Helpful info would be:

State the property is in
Total units
Unit mix
Proposed rents

But if I had to give it a five-minute analysis I would say it’s PROBABLY not worth your time to pursue. Particularly if you can get a good deal, you may be better off buying the property conventionally and enjoying the cash flow.


Re: low income housing credit - Posted by Dave T

Posted by Dave T on April 20, 2002 at 18:27:09:

This site has a good explanation of the program.


Re: low income housing credit - Posted by david s

Posted by david s on April 22, 2002 at 19:37:06:

To Nate(DC):
Thanks for the info. The state is Alabama, there are fourteen units, the current owners built it sixteen years ago, and no rehab has been done. The mix is approx. 50% sec. 8, the rest private. Rents range from $250 (2 bd) to $375 (3 bd). That is low for this area and can be raised quickly.
Thanks for your time. Is this worth pursuing for income tax credit?