Affordable Housing Tax Credit In Danger of Expiring
Affordable Housing Tax Credit In Danger of Expiring
An Arizona tax credit that has proven highly effective in spurring more affordable housing is set to expire at the end of this year if lawmakers and Gov. Katie Hobbs don’t agree to renew it.
The state’s “Low Income Housing Tax Credit” — created in 2021 under former Gov. Doug Ducey — allows developers that are already tapping into the federal government’s low income housing tax credit to save additional money on state taxes when they build affordable housing projects.
Developers must agree to set aside a minimum number of units for renters with lower incomes for 30 years.
The Arizona Department of Housing says the tax credit has been “the most successful rental housing production program in Arizona,” with thousands of units built because of it.
Glendale Apartments Made Possible By Tax Credit
The first apartment community to take advantage of the state’s expanded tax credit was Centerline on Glendale, which recently opened with nearly 400 units and rents ranging from $497 to $1,800 per month.
The pioneering project includes solar power, electric vehicle chargers and a community kitchen and restaurant incubator. It is close to a health clinic and high school.
“Centerline on Glendale is a perfect example,” Gorman & Company President and CEO Brian Swanton said. “This project wouldn’t have happened without the state credit.”
The community was built on a lot in an economically depressed area that had been vacant for years, he said. Now it is expected to generate $30 million in new tax revenue, $15 million in economic activity and more than 100 jobs.
“We were wondering how we were going to make this pencil out,” Swanton said. “I don’t know where else I would have gone to find the funding. It was the perfect opportunity to take advantage of the new state credit and provide much-needed housing in Glendale.”
Funding Flexibility Ensures Projects Across Arizona
A second project by Gorman, turning a more than 100-year-old schoolhouse into apartments in Globe, also benefited from the state tax credit. The building had been boarded up for decades.
A majority of the 64 units will be set aside for seniors.
“This was a completely different approach,” Swanton said. “It was rural, adaptive reuse, senior housing. It shows the flexibility in the state credit. There are so many types of projects you can do with it.”
Economic Benefit Is ‘Huge’
Arizona desperately needs more housing, and letting the state tax credit run out would be a big blow, Swanton said, calling it a “tried and true program.”
“The more expensive everything gets from land to construction materials to labor, the more difficult it is to make the numbers work” without tax credits, he said.
The developer hopes political leaders realize what an economic boon the tax credit is for Arizona. Nearly 30 other states utilize the program.
The projects turn vacant land into permanent housing, create jobs and drive new taxes that go to local schools and public services.
“Everyone focuses on the expense side — what it’s going to cost the government,” Swanton said. “But the program more than pays for itself. The public benefit is huge.”
