In July 2021, Arizona joined over a dozen other states by creating a state low-income housing tax credit. Arizona, like most other states, has seen its affordable housing crisis worsen, and states are searching for ways to increase housing production. By increasing the equity in a project, a state tax credit can be a powerful supply side tool. This is particularly true for affordable developments housing extremely low- income renters and being built in low rent areas – two objectives desired by nearly every state housing authority.
Arizona’s state Low Income Housing Tax Credit (LIHTC) is a 10-year credit that can be paired with projects utilizing either 9% or 4% federal LIHTC. Arizona’s state LIHTC has an annual cap set at $4 million and can be worth at least 50% of the amount of the federal LIHTC. The Arizona Department of Housing (ADOH) started issuing state LIHTC awards in 2022 with three rounds: the February 4% LIHTC Metro, April 9% LIHTC Rural, and August 4% LIHTC Metro.
Program advocates believe the Arizona state LIHTC can generate $160-million worth of investment in affordable housing over the duration of the program, which is set to expire in 2025. The hope is that the Arizona state LIHTC will enjoy similar success to other state programs like those in Colorado and Georgia. In Colorado, the state LIHTC has spurred the development of more than 4,000 units that would otherwise not have been built. In Georgia, the state LIHTC enabled the development of more than 25,000 units, equaling over $4 billion in economic impact.
While the tax credit alone cannot solve the immense demand for affordable housing, state low-income housing tax credits are another innovative resource to encourage more development.
HDJ, Inc. is a leading national design firm providing architectural and engineering expertise to support the affordable housing industry throughout the United States. HDJ’s diverse portfolio includes successful outcomes with adaptive reuse renovation, acquisition rehab, new construction, historic preservation and RAD.
Author: Josh Hahn