Missouri awards over $40 million in low-income housing tax credits
For the second year, half the credits will be dispersed on an accelerated plan in an effort to make the program more efficient
State Treasurer Scott Fitzpatrick, left, pushed for accelerating redemptions of low income housing tax credits. (Rudi Keller/Missouri Independent)
The Missouri Housing Development Commission has approved over $40 million worth of federal and state tax credits to help developers build 1,791 low-income housing units around the state.
In a meeting last week, the commission agreed to issue half the credits on an accelerated basis — the second year they’ve adopted the approach, which proponents say will make the program more efficient.
Missouri has two types of low-income housing tax credits, and the more expensive and sought-after by developers is awarded in conjunction with federal credits.
Missouri is one of 25 states operating a state version of the low-income housing tax credit program to supplement the federal program. Missouri matches up to 70% of the federal credits for the kind of tax credits most highly sought after.
To qualify, developers must agree to reserve a portion of rent-restricted units for lower-income tenants, and the project must remain as low-income housing for 30 years.
The state’s program has been criticized in the past for its inefficiencies and over the amount of funding that actually ends up put into affordable housing.
Developers sell the tax credits for less than face-value to investors, who then redeem the credits over ten years to offset their income tax liabilities. In return, developers receive equity to help cover construction costs.
The state previously matched up to 100% of the federal allocation. A 2014 audit found only 42 cents of every tax credit dollar went to construction of low income housing.
In 2017, former Gov. Eric Greitens successfully stacked the commission in order to kill the state’s tax credit program, and as a result, for three years Missouri issued only the federal credits. The program was reinstated in 2020, two years after Greitens resigned from office, and the match rate was capped at 70% amid pressure to make the program more efficient.
Last year, the commission put half of tax credits on a faster redemption plan, an idea pushed by State Treasurer Scott Fitzpatrick that was based on a report that found investors were willing to pay more for the credits when they could be redeemed sooner. The average price investors paid was roughly 58 cents per credit in 2020, but rose to around 68 cents in the accelerated redemption pilot, according to the state’s pilot program data.
Developers on the accelerated plan receive around 71% of their credits within the first five years rather than only half within that time period.
The effects of new projects on general revenue won’t be known for roughly two years from the approval date, MHDC Executive Director Kip Stetzler told the commission last year, because of the time it takes to finalize the sale of tax credits and then construct the units.
This year, Missouri’s housing development commission received 115 applications for the tax credits and approved 33.
Projects are divided into four regions. Applicants compete among those in their region and are scored on measures including the site location and level of cost-burdened tenants in the region. The housing development commission also holds community public hearings. In Jefferson City this year, none of the four projects competing for the tax credits were approved, in part due to local opposition, the News Tribune reported.
The projects approved to receive the highest amounts in tax credits include:
- In Maryland Heights, near St. Louis, a 60-unit senior facility will be built by developer Ring Property Company LLC. The project will receive nearly $700,000 in state tax credits and over $1.5 million in federal tax credits.
- In St. Louis, a family complex with 91 units by developer McCormack Baron Salazar Inc., will receive roughly $650,000 in state tax credits and $1.4 million in federal credits.
- In Lee’s Summit, a senior facility with 50 units by developer JES Development Co Inc. will be built, with around $620,000 in state tax credits and $1.3 million in federal tax credits.
- In Washington, near St. Louis, MOCAP Development Company LLC will develop a 48-unit project for seniors, with $590,000 in state tax credits and $1.3 million in federal tax credits.
- In Branson, a 48-unit family housing project, also by Ring Property Company LLC, will be developed with roughly $580,000 in state tax credits, and almost $1.3 million in federal credits.
JES Development Co Inc., is run by a decades-long heavy-hitter in the industry, Jeffrey E. Smith. Ring Property Company is managed by Robert Ring, who worked at JES.
The low-income housing tax credit was the second-largest tax credit program based on annual redemptions in fiscal year 2022. Over $113 million in the credits were redeemed, second only to Missouri Works, an incentives program for creating jobs in the state.
Over half of publicly-supported rental homes in the state are supported by low-income housing tax credits, according to data from the National Housing Preservation Database. Missouri has 43 affordable and available rental homes per 100 extremely low income renter households, according to the National Low Income Housing Coalition’s report from this year.
In the next five years, roughly 9,000 publicly supported rental homes in Missouri are at risk of loss, according to the National Housing Preservation Database, because developers are only required to maintain the units as low-income housing for 30 years. The LIHTC program in Missouri started in 1990 to supplement the federal program which started in 1986.
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