Written by Michael J. Novogradac, Glenn A. Graff, and Nicolo R. Pinoli, Published by the Journal of Affordable Housing, Volume 18, Number 4, Summer 2009

On February 13, 2009, both the House and Senate passed the American Recovery and Reinvestment Act of 2009 (the Recovery Act). President Barack Obama signed the bill into law on February 17, 2009. As part of the Recovery Act, Congress attempted to provide funding assistance to stalled Low Income Housing Tax Credit (LIHTC) developments. Since early 2008, the LIHTC industry has seen a precipitous fall in the number of active LIHTC investors, and a corresponding decline in LIHTC equity prices. This fall in equity pricing has led to large financing gaps in development budgets resulting in many stalled LIHTC developments. In the Recovery Act, Congress authorized two major new tools that LIHTC allocating agencies can use to help close financing gaps: the LIHTC cash exchange program (Exchange Program) and the $2.25 billion LIHTC gap financing program (TCAP).

This article outlines the statute that authorizes each of these two new tools, followed by a discussion of the written guidance from the Treasury Department regarding the implementation of the Exchange Program and the written guidance from the Department of Housing and Urban Development (HUD) regarding the $2.25 billion in TCAP financing. This article also reviews issues affecting their implementation. In spite of the need for additional guidance in many areas, LIHTC allocating agencies have aggressively taken steps to implement both tools. Ironically, the creation of these two new tools has actually further stalled many projects over the short run as project developers attempt to assess implications of the new tools. Over the longer run, however, these new tools are expected to unfreeze numerous LIHTC developments.

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