The LIHTC Program
The federal Low-Income Housing Tax Credit program was enacted in 1986 and provides tax incentives to encourage the private investment of capital for the development of decent, affordable rental housing. To receive the benefits of the LIHTC, the program requires owners of qualifying rental housing to maintain compliance with low-income occupancy requirements for a minimum of 15 years. Those projects that received their tax credit allocations after 1989 must continue to meet federal low-income occupancy requirements for an extended period (usually a minimum of 30 years).
Asset Management Expertise
Since 1986, Enterprise has used the Low-Income Housing Tax Credit—for which it was both advocate and pioneer—to finance over 70,000 affordable apartments and homes. The asset management Enterprise provides to its more than 1,300 investment projects not only adds value to the properties in the portfolio but is also a customary way for Enterprise to do business.
Year 15 Experience
In addition to delivering valuable oversight to a growing portfolio of housing investments, Enterprise also works with partners to transfer project ownership to the sponsor when the 15-year compliance period is complete. The first tax credit projects in which Enterprise-managed funds invested are currently reaching the end of the 15-year compliance period, and are now eligible to be sold. At this point in a LIHTC project’s life cycle, the investor typically no longer has an economic interest in the investment, and would like to dispose of its investment in the project.
Beginning in 2002, Enterprise has worked with investors and sponsors on disposition strategies for LIHTC projects. These include multifamily, inner-city scattered site, mixed use, mixed income and lease purchase projects. In most cases the investor’s interest in the partnership was transferred to the nonprofit sponsor, via a right of first refusal, following the expiration of the LIHTC compliance period. The exceptions involved lease purchase projects where the project was sold to the nonprofit sponsor, who in turn sold the homes to the residents and the partnership was dissolved. In a few cases the investor disposed of its investment prior to the expiration of the LIHTC compliance period (an early out), requiring disposition bonds. In addition to guiding Year 15 transactions with its own partners and sponsors, Enterprise also provides training, refinancing, resyndication, and consulting services to investors and developers with LIHTC properties reaching the end of the tax credit compliance period. |
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