In a new paper commissioned by the Massachusetts Housing Partnership (MHP, www.mhp.net), based on a survey of stakeholders in Massachusetts and other states, the firm Recap Advisors recommends 10 strategic steps that state housing credit agencies should take to most effectively allocate their 2009 low-income housing tax credits in the current troubled LIHTC equity environment. These recommendations include:
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Participate with stakeholders in a collective response to the crisis. Shared interests should trump parochial or competitive interests.
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Allow strong, equity-backed applicants to apply and win. Viability is key, as is reliable execution.
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Make non-critical transaction features optional, for points. Thresholds can be counterproductive when demand is less than supply.
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Keep the competitive process. It harnesses market forces, even in weaker markets.
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Collect and disseminate reliable data on LIHTC markets: allocations, awards, pricing.
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Break the equity bottleneck using QAP criteria. Give substantial extra points for reliable and ready equity.
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Provide an underwriting cushion to handle equity price drops. Stress-test applications with lower-than-expected equity prices.
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Have resources available to assist pipeline properties to close. They represent a sunk cost (by somebody) and an affordability opportunity.
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Avoid incentives that align against equity markets. Rather than lose credits to a national pool, spend your resource in your state.
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Maximize flexibility with gap-filler resources. Plus-up any other LIHTC compatible resources available to you.