The new Congress and the incoming Obama administration have yet to tip their hands on how they are going to address the state of affordable housing – or, to be more accurate, the lack thereof. For years, affordable housing was ignored by Washington. However, the twin crises within the housing and credit markets have made this problem worse, and it is still not being adequately addressed.
However, a viable solution may be at hand. According to an article in New Orleans CityBusiness, the Louisiana Legislature is considering the creation of a new publicly funded bridge loan fund that will enable developers to use tax credits to develop low- and moderate-income housing. The loans provided to developers would be paid back upon the syndication of the developers' tax credits.
In Louisiana, the timing of the program is fortuitous. The research institute Policy Link has determined the ongoing credit crunch has made it very difficult for developers to close on the financing of their affordable housing projects. Last month, seven affordable housing projects planned for New Orleans were scrapped when financing could not be closed. Even though federal low-income-housing tax credits can cover up to 75% of the development capital for these projects, the additional funding has become extremely hard to locate.
The bridge loan fund will need at least $250 million from state and/or federal funding sources before it can proceed. New Orleans CityBusiness quotes Milton Bailey, the president of the Louisiana Housing Finance Agency, as being highly enthused about the bridge loan fund idea.
‘It's a hell of an idea,’ he says. ‘Clearly, there is an upfront cost associated with reserving the $250 million. But if you structure it as a revolving loan, the state has the potential to make interest and earn income while helping bring online workforce units that are desperately needed.’
Actually, there is another problem aside from reserving the $250 million: Louisiana's state budget is running in the red. Make that deep red: the budget deficit is $1.3 billion. And the federal budget isn't exactly fit and trim, especially with that $700 billion bailout/rescue program turning the deficit into a darker shade of crimson.
This circles us back to the initial dilemma raised here: What is the new Congress and new White House going to do about affordable housing? Obviously, there is no shortage of priorities that require addressing. But affordable housing has been ignored for too long, and bold solutions are long overdue.
The Louisiana proposal is a sensible strategy, and hopefully, that state Legislature will give it the green light. No one benefits by ignoring the question of affordable housing – it is time for serious answers.
– Phil Hall, editor, Secondary Marketing Executive.
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