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Use These Government-Incentive Financing Tools to Develop Mixed-Use Projects in the DC Metro Area

Lerch Early's Legal Update 2018, Vol. 1

Financing mixed-use development projects in the DMV can be quite challenging if you seek government incentive financing to subsidize your overall development costs. Typical federal programs include the noncompetitive 4 percent or competitive 9 percent Low Income Housing Tax Credit (LIHTC) program administered by the IRS, which allocates LIHTC awards to investors through certain local government agencies in exchange for providing upfront capital to developers of affordable housing.

In addition, HUD’s Community Development Block Grants (CDBG) program funds, in part, housing development to revitalize neighborhoods, promote economic development, and improve community facilities, and its HOME Investment Partnerships (HOME) program provides direct financing for developers to build, buy, and/or rehabilitate affordable housing through local government agencies as well.

The following is a quick overview of government-incentive financing programs in the DMV’s local government agencies that allow developers to combine with private equity and/or debt financing to fund mixed-use development projects.

District of Columbia
Department of Housing and Community
Development (DCHCD)

  •  Housing Production Trust Fund (HPTF) - A major tool used to produce and preserve affordable housing by financing predevelopment loans for non-profit housing developers; site acquisition, collateral, operating capital loans, and/or construction loan guarantees; and bridge loans and/or gap financing to reduce upfront and operating costs.

Housing Finance Agency (DCHFA)

  •  Multifamily Mortgage Revenue Bond Program (MMRB) - Raises funds through the sale of tax-exempt and taxable bonds in the municipal bond market in order to provide long-term financing for all stages of the development process to nonprofit and for-profit developers of multifamily rental housing projects. • McKinney Act Loan Program - Offers short-term predevelopment bridge loans to finance the acquisition, predevelopment, and rehabilitation costs associated with housing development.

Maryland
Department of Housing and Community
Development (MDHCD)

  • Collaborative Financing - Collaborates with banks to finance permanent takeout, bridge, and construction loans for mixed-use development projects.
  •  Credit Enhancement and Guarantees - Reduces banks’ risk to provide investment in key development projects.
  • Loan Participations - Participates as a syndicator with various banks so they may reduce borrower/developer exposure and/or increase existing loan amount for development projects.
  • Community Legacy Funding - Funds projects located in MDHCD’s “Sustainable Communities” to revitalize these communities through mixed-use development consisting of residential, commercial, and/or open space.

Virginia
Department of Housing and Community
Development (VAHCD)

  • Direct Financing - Provides direct finance for the development of affordable housing projects for eligible project costs to include new construction, rehabilitation and acquisition.

Housing Development Authority (VADA)

  • Direct Financing - Provides direct financing for every stage of development for rental properties and mixed-use projects.
  • Tax-Exempt Program - Provides a range of financing products through this program.
  • Sponsoring Partnerships and Revitalizing Communities (SPARC) - Provides below-market financing through SPARC to qualified affordable housing projects.

Having worked with HUD, USDA Rural Development Agency, and many local and state housing agencies, Stephanie Smith helps developers and other businesses create communities from start to finish, including corporate structuring, property acquisition, contracts, financing, and closing on multifamily and mixed-use projects throughout the Washington, DC area. For more information on government-incentive financing tools, contact Stephanie at 301-907-2802 or smsmith@lerchearly.com.

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This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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