America is facing a housing crisis, a crisis that shows little signs of slowing down.

The problem is growing faster than our society can respond.

• In 70% of the country working Americans cannot afford a home and are renters.

• 1 in 4 renters are spending at least 50% of their income on housing. AND 3 in 4 of the LOWEST-INCOME renters spend at least 50% of their income on housing.

• Thus, budgeting for housing often results in insufficient money being available for other necessities like food and medical care with cost burdened renters being 23% more like to face difficulty purchasing food.

• The apartments that working Americans can afford are often riddled with safety and health hazards as well as being located in communities with limited resources. For every 10% increase in households facing severe housing burdens equates to an additional 84,000 people of fair or poor health, 86,000 people who are food insecure and 29,000 more children living in poverty.

A look at the differences between the two principal programs designed to provide Affordable Housing and the Communities they serve.

Very low income and homeless.

• Nonprofit organizations usually pursue 9% competitively won tax credits that serve very low to extremely low-income households with 30% to 40% of the median income or lower, and the homeless.

  • Non-profits get about 80% of the cost funded by these tax credits. There are many additional sources of grants and funds available to fill the gap.

  • However, these tax credits are scarce creating a competitive market with annual applications often reaching 3 to 4 times the amount of tax credits available. Sometimes it can take several annual application cycles to get a project funded.

Employed Working Taxpayers with low Paying Jobs Earning less than 60% of Median Income.

• Profit organizations usually pursue 4% non-competitive tax credits that serve Americans making 60 percent of the median income.

  • The 4% tax credits tend to cover 30 to 35 percent of the project cost resulting in a need for additional funding which is required under the tax law, and…

  • The tax law requires that to qualify for the tax credits, the projects must be coupled with funding from private activity bonds equal a minimum of 50% of project cost.

    • These bonds, like the 9 percent credits, have a yearly allotment and States rarely have requests that exceed all the year’s allotment, thus making the allocation of the credits and the bonds likely.

    • However, the bonds are often a more expensive source of funding than other loans that may be available to the project.

  • The combination of 4% tax credits coupled with private activity bonds is far more expensive than the 9% tax credit program.

Obstacles to Developing 4% Tax Credit Projects.

There are a number of obstacles causing economic problems for 4% Tax Credit affordable housing projects. Some of the leading obstacles include the following:

• Tax Credits are worth less and thus provide less funding.

  • The recent corporate tax rate reduction from 35% to 21% has resulted in change in the value that investors pay for tax credits from $1.05/dollar to $92/dollar significantly reducing proceeds available to fund low income housing.

• Increased Interest Rates. As interest rates go up the dollar amount on loans taken out go down.

• Significant increase in construction costs.

  • The increase in construction has resulted in higher cost of materials and labor.

  • Adding to the increased costs is the increased delays due to the demand for materials and labor.

• Increased governmental regulation

  • It is necessary to work closely with the regulating government agencies handling approvals and permitting.

  • Some local governments have high development costs attached to hook up of utilities including sewer and water mains and power grids.

  • Some local government have strict limits on the density and locations for projects, thus limiting the ability to maximize space on the land.

Some of HumanKind Housing’s solutions.

• Humankind housing will seek out areas designated as “Difficult to Develop” (DDA) or “Qualified Census Tracts” (QCT)

  • QCT is a census tract in which at least 50% of the households have an income less than 60% of the Area Median Gross Income.

  • By developing in these areas, we receive a bonus tax credit equal to 130%.

  • By choosing these areas we not only build homes, but have an opportunity to build communities.

• Secondly Humankind Housing will decrease new construction costs using modular construction.

  • The cost of modular construction can save 10 to 20 percent of the cost of traditional construction.

  • Modular construction reduces the production period up to 50 percent, saving construction period interest expense and also getting projects to market faster.

  • The modular units are made under a roof which minimizes the concern for weather delays and provides better control against cost overrun.