Senate Banking, Housing and Urban Affairs Committee

Subcommittee on Housing and Transportation

Hearing on the Low-Income Housing Tax Credit

Good afternoon, I am Rick Ferrara, the Executive Director of the Housing Opportunities Commission of Montgomery County, Maryland. I am very pleased to have the opportunity to speak to you about the Low Income Housing Tax Credit Program. With me is Patrick Maier, HOC's Director of Mortgage Finance.

This program has become a mainstay of HOC's efforts to increase the supply of affordable housing and to maintain existing federally assisted housing with expiring subsidy contracts. However, due to the per capita limitation, 9% credits are virtually unavailable in Montgomery County and 4% credits are in extremely short supply. We desperately need an increase in the tax credit allocation, which has been in effect since 1986.

Let me give you a little context about my agency and the jurisdiction we serve, Montgomery County, Maryland. The Housing Opportunities Commission is a public housing authority, but our mission is much broader than just the provision of very low income public housing. Montgomery County is a diverse and rapidly growing community of 825 thousand people that is considered one of the most expensive areas in the Nation.

Housing needs in Montgomery County run the gamut from very low income residents struggling to get off of welfare to moderate income workers who are hoping to purchase their first home within a reasonable commute of their job. Many, many households are not able to obtain affordable housing even though Montgomery County has been the leader in job growth in Maryland.

Some time ago, our agency realized that serving the needs of our community required a broader range of programs than afforded by low income public housing and Section 8. In 1979, we became a local housing finance agency and started the development of what we refer to as "Opportunity Housing". Opportunity Housing is a catch-all phrase that describes a variety of Federal, State and local programs that we have used to meet the housing needs of low and moderate income citizens in Montgomery County.

The low income housing tax credit became a key part of our strategy to serve these citizens in 1987, when we formed our first tax credit partnership to purchase Moderately Priced Dwelling Units. This partnership was named, creatively, " Tax-Credit I". We are now on our fifteenth tax credit partnership for a total of 1,047 units.

Almost 34 million dollars have been contributed by investors in these tax credit partnerships, of which HOC is the general partner.

The total value of these developments is almost $100 million, and the tax credit investment represent a third of that cost. I have included as an attachment to this testimony, a listing of these partnerships. You will also note a listing of the reasons residents have moved from their tax credit financed homes. We are pleased that 32% of the tax credit residents went on to purchase their first home.

I know that many of you may think of the Low Income Housing Tax Credit as a private sector program, which in many respects it is. Certainly, the investment generated by this tax credit has brought private investors and corporations to the low income housing production process. However, in the case of our agency and thousands of non-profits across the Country, this program has become a critical tool in serving our communities.

In fact, one of the most worthwhile aspects of this program is that it marries public sector idealism and responsiveness with corporate accountability and attention to performance.

In the early years of the tax credit program, we were successful in competing for and obtaining 9% tax credits for partnerships created by HOC, that purchased moderately priced dwelling units. These units are very affordable due to the higher credit amount. More recently, we have been unsuccessful in obtaining 9% credits, due to the increased competition and greater need for affordable housing in Maryland.

Most recently, we have used the 4% low income housing tax credit to assist in the acquisition and preservation of Federally assisted developments under the Section 236, and Section 8 programs. These developments which are a critical part of Montgomery County's affordable housing stock, would otherwise be lost due to developer prepayment and subsidy contract expiration. Without other subsidy sources, in addition to the Low Income Housing Tax Credit, the preservation of this affordable housing would not be possible.

HOC has purchased one Section 236 development, one Section 8 new construction development, and has a second 236 development under contract. You can imagine, in an expensive market place such as Montgomery County, what a devastating loss would be experienced by the residents, as their communities convert to market rent levels.

Tax credits are a critical part of serving affordable housing needs in our community. While we have been successful, to date, with this program, the proposed increase to $1.75 per capita is long overdue.

Thank you again for the opportunity to comment on the need to increase the Tax Credit. We are hopeful that you will also enact a substantial increase in the Private Activity Bond Cap which will enable both the financing of affordable housing and the provision of the 4% tax credit.

We are now ready to answer any questions that you and any other Senators might have.

NOTE: Analysis excludes all MPDU's operated under Public Housing, State Partnership Rental and State-Connected Section 8 Programs.

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