Panel Discussion: National Council of Housing Market Analysts
November 12, 2019
Arbour Valley Communities in conjunction with Florida Housing Finance Corporation and Vogt Strategic Insights, a market research firm, discussed Florida’s first “Average Income” property. Arbour Valley’s new 80-unit family development in Dade City, FL, Arbours at Hester Lake, was used as a case study to illuminate decision making behind its Average Income election.
A recent revision to Section 42 of the Internal Revenue Code created a third minimum set-aside election, the “Average Income Test,” to qualify low income housing tax credit (LIHTC) properties. Prior to this revision, buildings were qualified by occupying either 20% of the units with residents earning at or below 50% of Area Median Income (AMI) or 40% at or below 60% AMI.
The Average Income election provides greater flexibility for qualifying buildings, as properties can serve households with incomes up to 80% AMI—an income level previously unaddressed by the IRS Section 42 LIHTC program. These higher income households can occupy LIHTC units, as long as the overall average income of the property remains at or below 60% AMI. To arrive at an average income of 60% AMI or less when accommodating residents up to 80% AMI, a property must also serve extremely low income households; in Florida, the state agency requires that 15% of the units be occupied by residents at or below 30% AMI.
What does this all mean? Why do income averaging?
For Arbours at Hester Lake, the Average Income election allowed the property to expand its potential resident pool; more units opened up for residents typically under income in addition to units becoming available to residents previously shut out by being over income. This provides more broad-based benefit to the community. Further, with a broader pool of residents, Arbour Valley expects the property to lease up smoothly upon construction completion.