Hartford Business Journal

6 Hartford Business Journal • February 12, 2018 • www.HartfordBusiness.com By Gregory Seay gseay@HartfordBusiness.com S ome Connecticut housing developers and funding agen- cies, while wary of fallout from recent federal tax reform on the desirability of two popular forms of housing tax credits, are not yet sounding alarms. While the reduction of the corporate income tax rate to 21 percent from 35 percent was welcomed by American businesses and investors, others worry about the parallel effect of curbing investors' appetites for the tax-liability offsets that housing tax credits offer, experts said. A lower federal corporate tax rate means the banks, insurers, utilities, large manufacturers and services providers, among others, who over the last three decades have purchased federally issued low-income housing tax credits (LIHTCs) and state-issued housing tax credit contributions (HTCCs), don't have to rely on them as much to trim their state and federal tax bills. However, some experts said the impact won't be severe because busi- nesses will still want to leverage hous- ing tax credits to cut their IRS and state-income tax bills even more. And, another plus is that federal tax reform didn't alter the accessibility or value of housing tax credits issued by Connecticut to spur development of affordable rental and owner-occupied dwellings, observers said. "Businesses will continue to take advantage of any tax-savings opportu- nities they have,'' said Cal Vinal, presi- dent and CEO of Hartford's Capital for Change, formerly Connecticut Hous- ing Investment Fund Inc. Vinal added that some businesses, reviewing the implications of tax reform, may be learning for the first time about the tax benefits of housing tax credits and, thus, inclined to use them. Capital for Change helped amass tax credits, Vinal said, used for ongoing development of the Capewell Town Homes, a project of The Corporation for Independent Living, in the city's South End, and with San Juan Center Inc.'s renovation of two, six-unit apart- ment buildings in the North End's Clay-Arsenal neighborhood. Electricity-nat- ural gas provider Eversource, by far Connecticut's biggest purchas- er of millions of dollars of state- issued housing tax credits over the years, said that the utility will continue to invest. Over the last 15 years, Eversource spokesman Mitch Gross said the utility has acquired tens of millions in hous- ing tax credits. Eversource's tax-credit spon- sorship of low- income housing, Gross said, has put it in partner- ship, along with Capital for Change, with such local nonprofit developers/preservationists as Habitat For Humanity Hartford, Mutual Housing Association of Greater Hartford, and the Hartford Preserva- tion Alliance. "We purchase these tax credits from the state of Connecticut as part of our economic development efforts and will continue to participate in the state program,'' Gross said. "While changes to the federal housing tax credits may make some future projects difficult to finance going forward, we remain committed to helping develop strong communities, and the work done by these nonprofit organizations benefits the entire community." Affordable housing Congress in 1986 authorized the federal housing tax credits to spur creation of shelter, most of it rentals, for the nation's neediest. According to the federal Hous- ing and Urban Development's (HUD) homepage, low-income housing tax credits issued between 1987 to 2015 have funded development nationwide of nearly 46,000 housing projects and 2.97 million housing units. The money exchanged for LIHTCs is a vital funding stream for for- and nonprofit devel- opers/sponsors/ managers of new or renovated low-income housing. Typically tax-credit proceeds are com- bined with bank loans or mortgages, and equity from developers/investors, to finance the properties' construction and operation. The Connecticut Housing Finance Authority (CHFA) annually awards its allotment of some $8 million in LIHTCs, that when fully leveraged by developers, generate roughly $80 mil- lion in project funding, said Executive Director Karl Kilduff. Corporations and wealthy individuals eager to shield at least some of their annual income from state and federal taxes pur- chase the credits. CHFA's next LIHTC awards are set for late March. The credits are a vital funding linchpin to Gov. Dannel P. Malloy's long-running efforts to create enough housing to effectively end homeless- ness in the state. Since 2011, Connecticut said it has invested more than $1 billion to build, renovate or preserve some 23,000 liv- Credit Preservation Developers, funding agencies say tax reform likely won't pull the rug out from housing credits Karl Kilduff, Executive Director, The Connecticut Housing Finance Authority The Corporation for Independent Living relied on housing tax credits to develop its Capewell Town Homes in the shadow of Colt Park, in south Hartford's Dutch Point neighborhood. Tax-credit funded projects like Capewell let corporations and wealthy investors promote housing while tax-sheltering income. State, federal housing and historic tax credits facts • The historic rehabilitation tax credits are available for properties listed on the State Register of Historic Places and the National Register of Historic Places. • Post-rehabilitation uses can include housing and commercial development. • In the past two fiscal years (FY 2016 and FY 2017), the State Historic Preser- vation Office (SHPO) reserved $63.4 million in state rehabilitation tax credits for 36 projects totaling $297.5 million in eligible expenditures. • For the current fiscal year the SHPO has reserved $28.8 million of its $31.7 mil- lion annual allotment. This leverages $114.2 million of eligible rehabilitation costs. On-going projects of note include: • J.R. Montgomery & Company Industrial Complex in Windsor Locks: Post rehabilitation-use, Housing • Neiditz Building, 111 Pearl St., Hartford: Post-rehabilitation use, Housing • Boese, Peppard Lace Mill, 2 Merritt Place, Norwalk: Post-rehabilitation use: Supportive house and services Source: CT Dept. of Economic and Community Development PHOTO | CONTRIBUTED PHOTO | CONTRIBUTED

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