MADISON – Statewide demand for housing tax credits among developers seeking to build more affordable rental housing for workers, families and seniors continues to outpace the federal and state resources available in Wisconsin.
For the 2021 tax credit award cycle, the Wisconsin Housing and Economic Development Authority (WHEDA) has received applications for 34 projects seeking $29.6 million in federal 9% housing tax credits to build 1,671 units available for low- to moderate-income renters. WHEDA also has received applications for 20 projects seeking $16.2 million in state 4% housing tax credits and $11.9 million in federal 4% housing tax credits to build 1,542 affordable units.
Eleven of the proposed 34 federal 9% projects are seeking to qualify under rural program set-asides while five of the 20 state 4% projects are seeking to qualify for designated rural awards.
WHEDA received $31.9 million in federal and state housing tax credits for the 2020 award cycle. WHEDA does not anticipate a significant increase in that amount for the 2021 award cycle.
“The demand for these highly competitive tax credits indicates a continuing, acute shortage of affordable housing throughout Wisconsin,” said WHEDA CEO Joaquín Altoro. “However, tax credits and WHEDA-backed financing are not sufficient to address the needs. Many factors are contributing to the shortage and at WHEDA we are continuing to work with our partners to achieve better alignment through federal resources, private investment incentives, local development policies, employment opportunities and other tools.”
WHEDA has been the sole administrator for federal affordable housing tax credits in Wisconsin since the program began in 1986 and since the state program began in 2018. The programs do not subsidize renters; instead they provide tax incentives through the Internal Revenue Code and the Wisconsin tax code that encourage developers to create qualified affordable housing.
In exchange for receiving the tax credits, developers agree to reserve all or a portion of their housing units for low- and moderate-income households for at least 30 years. Any remaining units are rented at market rates. The developers then sell the tax credits to private investors to obtain funding. Once the housing project is available to tenants, investors can claim the tax credit as a dollar-for-dollar reduction of federal or Wisconsin income taxes owed over a 10-year period.
In 2020, funding requests also exceeded the $31.9 million allocation through the federal and state programs when applicants sought $61 million. WHEDA fully deployed the available credits in 2020 including some credits returned from prior allocations to help advance a total 2,058 affordable housing units.
Developments that receive affordable housing tax credits go through a highly competitive application process administered by WHEDA. Tax credit developments must meet high design and operating standards. Criteria include strong management, excellent development quality, demonstrated market need, provision of supportive services and amenities, proximity to economic opportunities and proper local zoning. The 2021 applications will be reviewed and scored, with results released in spring.
For more than 45 years, WHEDA has worked to provide low-cost financing for housing and small business development in Wisconsin. Since 1972, WHEDA has financed more than 75,000 affordable rental units, helped more than 133,000 families purchase a home and provided more than 29,000 small business and agricultural loan guarantees. WHEDA is a self-supporting public corporation that receives no tax dollars for its operations. For more information on WHEDA programs, visit wheda.com or call 800-334-6873.