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.