Tax credit 101: How the Section 42 program works
For developers and investors, building affordable housing can be rewarding, both financially and as a civic achievement. Here's how the process works.
The federal government issues tax credits to states based on population. A developer applies for credits competitively at a state housing finance agency and uses a syndicator to sell the credits to an investor, such as a life insurance company.
Typically, the developer, who earns a project fee, forms a limited partnership with the investor, taking a small ownership stake and managing the property, while the investor gets a 99.9% interest, but remains a silent partner.
The developer uses the equity from the sale of credits to partially finance an affordable housing project, typically covering 30% to 40% of the cost. The remaining financing often comes from other government-funded programs and conventional loans.
Developments financed under Section 42 of the IRS tax code must house a percentage of residents earning less than 60% of the area median income.
Acceptable Use Policy blog comments powered by Disqus
Want to use this article? Click here for options!
© 2012 Penton Media Inc.
advertisement
Photo Galleries
Hudson Yards Development
Check out images for Coach's new global headquarters, which will anchor the initial tower of the Eastern Rail Yards site within the 26-acre mixed-use Hudson Yards Development on Manhattan's far West Side.
Outstanding Women in Commercial Real Estate
From housing low-income families in Southern California to closing some of Manhattan's largest office leases, women leaders are using commercial real estate as a platform to reshape communities while they drive investor returns.
Click here to view more photo galleries.
Videos
2011 CoreNet Fall Summit Video Blogs
Check out these great videos from the 2011 CoreNet Fall Summit in Atlanta...
Click here to view more videos.
advertisement
Blogs
|
Traffic Court |
|
BlackSwan |
This Week's Most Popular
Current Issue
|
|







