You asked for a summary and legislative history of the (1) Private Rental Investment Mortgage and Equity Fund Program and (2) Housing Tax Credit Contribution Program. You also asked for each program's balances and a list of funded projects.

We are waiting for figures on the current balances and the number of projects funded, which we will forward as soon as they are available.

SUMMARY

The legislature enacted these programs to allow the state to provide financial assistance for affordable housing development. It enacted the Private Rental Mortgage and Equity Fund Program in 1988 and the Housing Tax Credit Contribution Program one year earlier.

The Private Rental Mortgage and Equity Fund Program allows the state to provide loans and grants to developers of housing that will include a certain percentage of units for low-income people. It authorizes the Department of Economic and Community Development (DECD) commissioner to subsidize rents of the low-income units in an assisted project and provide additional project financing through a second mortgage. In return for these investments, the state may receive equity interest in the property. Funding for the projects comes from bond authorizations and goes into the “Private Rental Investment Mortgage and Equity Fund,” from which project grants and loans are made.

Under the state Rental Housing Assistance Trust Fund Program, popularly known as the Housing Tax Credit Contribution (HTCC) Program, the Connecticut Housing Finance Authority (CHFA) allocates tax credits to businesses that contribute funds to nonprofit housing organizations that develop low- and moderate-income housing. CHFA ranks and rates nonprofit developers' applications and reserves credits for the highest scoring proposals. The nonprofit then offers the credits to businesses that make cash contributions to support the development. Businesses receive a dollar-for-dollar reduction in their state tax liability.

PA 06-186 doubled the amount of tax credits available under the HTCC program and expanded its scope as of July 1, 2006.

PRIVATE RENTAL INVESTMENT MORTGAGE AND EQUITY FUND (CGS § 8-400 et seq. )

Eligible Developers and Projects

The law allows DECD to provide financial assistance to non- and for-profit corporations, partnerships, limited liability companies, joint ventures, and sole proprietorships (i. e. , developers) whose organizational documents the CHFA approves. A family or individual approved by the authority is also eligible.

Projects may be new construction, or the substantial rehabilitation of an existing structure, containing rental units. These projects' primary purpose must be to house low- and moderate-income people, but they may contain units for higher income people as well as commercial or office space and health, recreational, community, service, and administrative facilities (CGS § 8-400).

Funds Available to Help Developers

The DECD commissioner may make grants or deferred loans to any project with 25 or more units that has a CHFA mortgage. The grant or loan for a single project cannot exceed one-half of the project's per-unit cost divided by the number of units in the project multiplied by the number of unit's rented to low-income people. Between 20% and 40% of the units must be rented to people whose income is 50% or less of the area median income. Loan repayments are paid to the treasurer and deposited into the General Fund (CGS § 8-401).

The grant or loan may be used for project costs, which include (1) land acquisition; (2) site preparation and land improvements; (3) architectural, engineering, legal, and other professional fees; (4) studies, surveys, and plans; (5) construction and equipment; (6) financing, taxes, insurance, and other costs incurred during construction; (7) expenses incurred in connection with project's initial occupancy; (8) reserves for working capital, replacement, contingency, and anticipated operating deficits for the first two years; (9) other costs that CHFA and DECD deem reasonable; and (10) reasonable profit for builder and developer.

The law also allows the DECD commissioner to provide additional project financing through a second mortgage. This must be repaid within 50 years of the project's completion, with quarterly interest payments at an interest rate set by the Bond Commission (CGS § 8-403).

Funds Used to Help Low-Income Families

The law authorizes the DECD commissioner to subsidize each low-income unit in such an assisted project. Subsidies must continue for at least 15 years. The subsidy equals the difference between the unit's rent plus an allowable amount for heat and utilities when these are not included in the rent (which is approved by the commissioner or the housing authority), and 30% of the tenant's income. Rents in low-income units may not be raised without the commissioner's approval.

A unit is low-income if it is available to a tenant whose annual aggregate family income is 50% or less than the area median income, adjusted for family size, in the year before he moves to the apartment. A family's income includes all family members' earnings, including Social Security and other retirement benefits. CHFA and the DECD commissioner may exclude from income (1) reasonable allowances for dependents and medical expenses, (2) all or part of the earnings of employed minors and family members other than the chief wage earner, (3) income received irregularly, and (4) other expenses.

If a tenant's income rises to over 60% of the area median income, he loses his eligibility for a rent subsidy. If it rises over 70% of the area median income, his apartment loses its low-income unit designation, and the next available unit must be rented to a low-income tenant (CGS § 8-402).

State's Return on Investment

The law requires the state to receive an equity interest in a project funded (1) with bond funds before July 1, 1995 and (2) before October 1, 1995. It allows the state to receive an equity interest for such investments in funds authorized and used after those dates. The state's interest is at least equal to the percentage of low-income units in the project. The DECD commissioner must approve the sale of the project, any interest in it or its units, and the sale terms and conditions (CGS § 8-404).

Legislative History

PA 88-261 (sHB 5957, favorably reported by the Finance, Revenue and Bonding Committee) combined several types of housing subsidies into a single program designed to stimulate the construction of larger, mixed-income apartment houses, creating the Private Rental Investment Mortgage and Equity Program for the construction of multi-family housing. We did not find any public hearing transcripts on sHB 5957.

On April 28, 1988, Representative Brooks (95^th district) brought out the bill in the House, stating “[w]hat we have before us is a bill that will allow the involvement of the CHFA and the Department of Housing, in terms of developing a financing scheme that will, I think, at last provide them with the necessary tools to get into a major financing of housing projects throughout the state. ” (PA 95-250 established DECD by combining the departments of Housing and Economic Development. )

Representative Belden (113^th district) subsequently asked several questions, which Representative Brooks (95^th district) answered, about the way the bill would divide the cost of developing a project between the state and private funding. He then proposed an amendment (House “A”) to align the bill with federal regulations concerning “30% plus allowance for heat and utilities. ” The amendment passed on a voice vote.

Representative Krawiecki (78th) proposed another amendment (House “B”) to require the Department of Housing commissioner to implement regulations for the program. Representative Brooks (95^th district) spoke against the amendment, stating that CHFA already had regulations that would essentially govern the program. Rep. Meyer (135^th district) and Rep. Maddox (66^th district) spoke in favor of the amendment. The amendment failed with 60 voting yea and 89 nay.

The bill, as amended by House “A,” passed unanimously. On May 2, 1988, it passed the Senate unanimously, without debate. Amendments since then have made only minor or technical changes. The last amendment was in 1996.

HTCC PROGRAM (CGS § 8-395)

Under this program, CHFA uses a system of tax credit vouchers to assist in the development of low- and moderate-income housing. Legislation passed this session (PA 06-186) increased the total amount of tax credits CHFA can annually award from $ 5 million to $ 10 million. It increased, from $ 400,000 to $ 500,000, the maximum amount per fiscal year that nonprofit housing organizations may use to develop housing for low- and moderate-income people. It also increased, from $ 1 million to $ 2 million, the amount of tax credits that CHFA must set aside for the Supportive Housing Pilots Initiative or the Next Steps Initiative; the act adds the latter. (These programs provide housing for people and families affected by psychiatric disabilities and chemical dependency who are homeless or risk homelessness, and for supervised ex-offenders with mental health needs, among others. The Next Steps Initiative was established in 2006 as phase II of the Supportive Housing Pilot. )

Eligible Businesses and Non-profit Developers

Eligible businesses for the HTCC program are insurance companies, hospitals, medical services corporations, air carriers, railroad companies, cable and community antenna companies, utility companies, and any other business paying corporate business taxes. A nonprofit organization that is developing, sponsoring, or managing housing for very low-, low-, and moderate-income people and families may apply to CHFA for the program.

HTCC Ranking System

By law, CHFA's system for ranking nonprofit developers must consider:

1. a project's readiness to be built;

2. if the funds would be used to build or rehabilitate a specific housing project or to capitalize a revolving loan fund providing low-cost loans for housing construction, repair, or rehabilitation to benefit very low-, low- and moderate-income people;

3. the extent the project will benefit very low- and low-income families;

4. evidence (a) of a nonprofit's general administrative ability to build or rehabilitate housing and (b) that any funds it received from vouchers CHFA issued were used to accomplish the goals set forth in the application; and

5. the (a) use of the funds to provide housing opportunities in urban areas and the impact of such funds on neighborhood revitalization and (b) extent to which tax credit funds are used to obtain other funds.

Other HTCC Provisions

By law, (1) no business can receive a credit for both the affordable housing tax credit program and the Neighborhood Assistance Act (CGS § 12-632) from the same cash contribution and (2) CHFA may not grant tax credits to any business for individual contributions of less than $ 250.

The law requires each nonprofit developer to provide CHFA with a quarterly progress report and a final report. If a project is not finished within three years, or if it is unlikely to be finished, CHFA may reclaim any remaining contributions and reallocate them to other programs.

The law allows two or more business firms to participate jointly in one or more affordable housing development programs for tax credits. But joint programs must be submitted, and acted upon, as a single program by the business firms involved.

The law also allows any tax credit that a business does not use when it made a contribution to carry forward or back for the five income-years immediately succeeding or preceding, until the full credit has been utilized. Businesses seeking credits must first claim them on the tax return in the income year when they made the cash contribution. The law specifies that nothing prevents a business from having a limited equity interest in the development from the contributions it made.

Legislative History

PA 87-377 (HB 7572, favorably reported by the Planning and Development Committee) authorized the Housing Commissioner to award up to $ 1 million a year in tax credits to businesses that contributed to nonprofit housing programs that developed housing for low- and moderate-income people. It repealed the rental housing assistance trust fund that was established in 1986 to provide similar credits for businesses that contributed to a state trust fund to assist low-income renters. Credits were available up to $ 50,000, with no credit for contributions under $ 250.

Committee, House, and Senate Discussion. At a March 30, 1987, Planning and Development public hearing, one person testified in favor of the bill. On May 21, 1987, Representative Blumenthal (145^th district) brought out the bill in the House. He then proposed three amendments. All three were passed on voice vote.

The first amendment required the Housing Commissioner, with approval of the Revenue Services Commissioner, to promulgate guidelines for the program. Representative Belden (113^th) asked if there would be a guideline for the Housing Commissioner to follow to determine the amount of a tax credit voucher. Representative Blumenthal (145^th district) answered that there would be, and that it would be the legislative intent “that those regulations also provide for the time and manner of submission of any business entity of such tax credit voucher…. ”

The second amendment clarified that the tax credit program would benefit nonprofit developers. Representative Meyer (135^th district) noted the similarity between the bill's intent and the program the legislature adopted in 1986, which the bill repealed. Representative Blumenthal (145^th district) later (when remarking further on the bill as amended by all three amendments) referred to the 1986 program as ineffective. The amendment passed on voice vote.

The third amendment added provisions to ensure the tax credits would not be abused. Representative Van Norstrand (141^st district) commented that he was concerned that the bill called for a system, but did not lay out criteria for the system; he also noted that he was not opposing the bill. The third amendment passed on voice vote without debate.

The House unanimously passed the bill as amended. On May 26, 1987, the Senate passed the bill as amended on consent.

Major Amendments Since Enactment. The bill has been amended several times since 1987, including this year as noted above. For example, PA 90-195 required regulations establishing a ranking system for housing program eligible for contributions. PA 95-250 replaced the Housing Commissioner with the CHFA.

PA 97-295 limited the housing programs that may be funded from businesses' contributions to those scheduled for completion within three years. The act added the quarterly progress report and a final report requirement and the three year deadline. Beginning in the 1998 income year, in deciding which programs to fund, the act required CHFA to consider provision of housing in urban areas, the effect on neighborhood revitalization, and the extent to which tax credit funds are leveraged by other funds, in addition to existing housing program ranking criteria.

The act also required any tax credit sought by a business for contributions to housing programs to first be claimed on its tax return for the income year in which the contribution to which the credit relates was paid.

PA 99-173 raised, from $ 1 million to $ 5 million, the annual limit on the total amount of tax credits CHFA could approve under the program. It raised, from $ 50,000 to $ 75,000, the total annual amount of credit a business could claim annually. It also raised, from $ 300,000 to $ 400,000, the annual limit on the total amount of contributions a nonprofit organization could receive under the program.

PA 00-170 removed the $ 75,000 annual ceiling on business for the tax credits. The act allowed only cash contributions to qualify for tax credits; removed the requirement that a business must at least match its previous year's contribution to receive a credit in a second year; and eliminated a prohibition on banks, insurance companies, savings associations, building and loan associations, or any other business from qualifying for the tax credit if the contribution is part of their normal course of business.  

The act also specified that the CHFA executive director must approve a nonprofit corporation's articles of incorporation before it is able to receive a donation for which the donor earns a credit. It authorized CHFA to approve nonprofits to receive tax-credit-eligible contributions. The act required the approval to be in accordance with existing DECD regulations.

PA 01-08, June Special Session, required CHFA to set aside $ 1 million a year in tax credits for supportive housing pilot initiatives.

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