Statement of Alabama Housing Finance Authority, Montgomery, AL 36109
Mr. Chairman, Representative Ramstad, and members of
the Subcommittee, thank you for the opportunity to comment on issues regarding
Katrina redevelopment.
As
you know, H.R. 4440, the Gulf Opportunity Zone Act of 2005, among other things,
allocated additional Low-Income Housing Tax Credits to Alabama to aid the 11
counties declared disaster areas in the wake of Hurricane Katrina. In addition,
the legislation designated the GO Zone as a Difficult Development Area. The
DDA designation allows a new construction development to receive a 30 percent
increase in eligible basis to offset added costs. The cost savings conferred
by the boost is passed on to the lower-income residents in the form of lower
rents.
H.
R. 4440 provides that DDA developments receiving the increased credits must be
placed in service by December 31, 2008. This deadline should not be a problem
for projects funded in 2006, but will prove inadequate for projects receiving
credit awards in 2007 and 2008. While we understand Congress’ intent to get
units operational as quickly as possible, the shortened deadline will make
construction in a demanding market unfeasible and will remove one of the
primary incentives for building in this area—ultimately reducing the number of available
affordable housing units.
The
recommendation of the Alabama Housing Finance Authority is that the December
2008 deadline be amended to match existing IRS Code Section 42 regulations
which state that a developer has two years from the time an allocation of
Housing Credits is made to place in service. Developers awarded GO Zone Credits
in 2007 and 2008 would then have until 2009 and 2010, respectively, to place
their developments in service and maintain the 30 percent boost in basis.
Thank
you for your attention.
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