What Happened?
The Cotton Mill Square housing project in Nashua, New Hampshire, is in need of an additional $300,000 in federal funding for development after city officials granted tax relief to the project two months prior.
So What?
Cotton Mill Square, LLC, is revamping a 108-year-old building in the community into affordable housing. The developer was granted five years of tax relief under the city’s Community Revitalization Tax Relief Incentive Program to assist in the funding of the $25 million housing strategy. The incentive program allows developers to buy and rehabilitate a building in downtown Nashua while enjoying a set period of tax relief on the project. The property owner will then grant a covenant with the city to ensure the rehabilitation offers a public benefit.
Via tax relief, the developer will be able to pay property taxes on the assessed value of the property currently, rather than what the reconstruction will be worth upon the completion of the project. Over the five-year period, projected tax savings are $250,000. The tax relief is not offering enough support for the project, spurring demand for an additional $300,000 from the HOME Affordable Housing Development Fund offered by the federal government.
HOME Partnerships Program
The U.S. Department of Housing and Urban Development operates the HOME Investment Partnerships Program that connects state and local municipalities, often partnered with nonprofits, with federal funding for housing initiatives. The partnerships aim to support local measure to build or rehabilitate affordable housing options for low-income residents. HUD allocates $2 billion in funding to state and local governments for community development, providing municipalities with more flexible financing options to sustain key aspects to affordable housing.
HUD establishes HOME Investment Trust Funds for localities that creates a line of credit to be tapped into during the duration of the project. The funds can be used for:
- Equity investments
- Interest-bearing loans
- Non-interest bearing loans
- Interest subsidies
- Deferred payment loans
- Grants grants
Communities are provided with funding based on a specific formula, or are given $3 million depending on which total is greater.
Qualifying
All affordable housing projects must offer options for low-income residents for 30 years, with 100 percent of the federal funding being used for direct development. Appropriate uses of the funds include:
- Property purchases
- Site improvements
- Development hard costs
- Financing costs
- Relocation expenses
- Operating cost assistance for rental housing
- Planning costs
Bismarck-Mandan Solution
A potential affordable housing project in Bismarck-Mandan, North Dakota, may be possible through a community land trust. A nonprofit organization could buy the land, while the Bismarck-Mandan Homebuilders Association could develop the 40 housing units. Local lawmakers are considering two bills regarding how the project would be financed: One bill would allow the Bank of North Dakota to assist community banks in the initiation of home loans, while another would call for contributions to the Housing Incentive Fund in exchange for tax breaks for donors. In light of the sequester cuts, officials are looking for a local solution rather than relying on federal funds.
Housing Innovations
Gov1 is monitoring the development of smarter cities and the role of federal grants in various developments.[/dw-post-more]