The Texas Department of Housing and Community Affairs recently awarded $99 million in tax credits that will help create and restore affordable housing across the state. Gov. Greg Abbott last week announced that the proceeds from the Housing Tax Credit Program will help finance development or rehabilitation of 63 rental properties offering reduced rents.
The awards will assist developers build or renovate approximately 4,410 units offering rents affordable to households earning up to 80% of the area median family income.
Texas faces a severe shortage of affordable housing, with just 25 available units for every 100 extremely low-income households. The percentage of affordable units has dwindled in the Lone Star state between 2012 and 2022, according to data from the Texas Comptroller’s office.
During that 10-year period, available units in Texas with rental costs under $1,000 per month fell by 29%. Available units with monthly costs between $1,000 and $1,999 rose by 113%, while units with rental costs of at least $2,000 increased by 253%.
The Housing Tax Credit Program is Texas’ primary means of directing private capital toward the development of affordable rental housing.
Tax credits are awarded to eligible participants to offset a portion of their federal tax liability in exchange for the production or preservation of affordable rental housing. Developers use proceeds from the sale of tax credits to help finance their property.
The credits awarded cover up to 70% of each property’s eligible development costs.
Investors purchasing credits allocated to developers may apply the credits toward their federal tax liability each year for 10 years on a dollar-for-dollar basis in exchange for their investment in the property.
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