- How do I finance purchase of rental housing?
- How do I develop and build rental housing?
- How do I rehabilitate existing rental housing?
- How do I build, acquire or rehab for sale housing?
- How do I create supportive housing for homeless and at risk?
- How do I develop single family lots?
- HOME
- Housing Tax Credits
- Bond Financing Continuum of Care
- Emergency Shelter Grant
- Tips to Consider
Housing Tax Credit Progam FAQ
What is the Housing Tax Credit Program? In 1986 the Low Income Housing Tax Credit Program was created as an incentive to encourage the construction and rehabilitation of rental housing for low-income households. The tax credits offer a reduction in tax liability to individuals and owners of corporation, trusts, partnership and other legal entities, subject to applicable restrictions.
What is an eligible project? New Construction, rehabilitation of at least $3,000 per unit, and acquisition of existing properties which will be substantially rehabilitated are eligible under the Housing Tax Credit Program. There are restrictions on the tenants (based on their income) and the rent charged for the housing units financed under Housing Tax Credit program.
How much funding is available? The U.S. Department of Treasury allocates over $2,000,000 in Housing Tax Credits to South Dakota annually. The South Dakota Housing Development Authority (SDHDA) administers the Housing Tax Credit Program on behalf of South Dakota. The Qualified Allocation Plan (QAP) outlines how the program is administered in South Dakota.
How is the Housing Tax Credit calculated? The annual tax credit amount is intended to provide the owner or investor a return which provides a “present value” of either 30 or 70 percent of the qualified costs of the low-income units in the development. Depending on the project type, the qualified project costs (depreciable costs) will be eligible for either 30% present value (correlating to 4%) or 70% present value (correlated to 9%). The maximum allowable credit amount is determined by multiplying the applicant annual percentage rate (approximately 4 or 9 percent) by the qualified costs attributed to the designated low-income units in the project.
How can I apply for Housing Tax Credits? Interested developers can access the SDHDA HOME/HTC Application or contact Scott Rounds at 605-773-4532 for additional information.
Where do I start in developing my project? The developer must first determine that there is a need for affordable housing. Conduct a Market Analysis of the area involved, taking into consideration the area’s annual income, community age, employment opportunities and project community growth. The analysis must also review the existing rental market including the number and size of units, rents charged targeted population, location, age, condition, amenities, etc. Developers are encouraged to contact SDHDA with any questions.
What are some of the main things to consider when putting together an application?
Applicants must focus on the financial feasibility of the project –
- What is the need for this development?
- What will it cost to build this development and what are the sources of financing?
- What will it cost to operate the development and are the projected rents marketable for this area?
