Council finance committee examines affordable housing development incentives

As the city braces itself for the loss of certain affordable housing properties as developer credit expires, Springfield City Council is trying to come up with ways to encourage that development in the future.

Specifically, council’s Finance and Administration Committee is looking at incentives and strategies for establishing more Low-Income Housing Tax Credit, or LIHTC, housing in the city.

As previously reported in Springfield Business Journal, a wave of affordable housing built in the 1990s through LIHTC credits are expected to revert to market rate housing in the next few years.

On April 14, the committee hosted a panel of local affordable housing experts to answer questions and provide insight on the ways the city can foster more LIHTC development.

SBJ reported last year on a looming crisis in the LIHTC sphere, with the loss of 1 million housing units predicted by 2040 by the National Housing Preservation Database.

Tax credits for developing LIHTC units have a mandatory compliance period of 15 years, and most projects have a 30-year requirement to provide affordable housing. Many developers seek an exit after the 15-year mark.

Bob Jones, the city’s grants administrator, said last year that in 2024, 110 units in Springfield reached the end of their compliance, and by 2025, another 36 were predicted to join them. Between 2024 and 2029, a total of 366 Springfield LIHTC units could end their compliance period, he said.

SBJ reported on a March 30 court hearing regarding a LIHTC exit by Zimmerman Properties LLC after 20 years. Residents including plaintiff Ramona Teeter alleged violations in the owners’ exit process – specifically a failure to provide residents with the required three-years’ notice of a property sale and the exit from the LIHTC program – and they testified to difficulty in finding affordable housing to replace the units from which they are being evicted.

The committee’s panel included six people who are active in the affordable housing space in Springfield and elsewhere. They were Debbie Shantz Hart, affordable housing developer from Cherryvale Development LLC and Housing Plus LLC; Becky Selle, property management authority and president of Sustainable Management Inc. and co-owner with Hart of Housing Plus; David Allison, consultant and development authority; and three representatives of Zimmerman Properties and Wilhoit Properties Inc.

Councilmember Brandon Jenson, committee chair, began the discussion by explaining the purpose of the committee’s effort, which is to explore additional alternatives to incentive affordable housing development. These could include tools, incentives or policy supports to make LIHTC projects easier to deliver.

Hart said the answer is to look at guidelines from the Missouri Housing Development Commission, which administers the federal LIHTC program for the state.

“You have to look at the guidelines from MHDC and talk about what deals are going to point well,” she said, referring to the point system by which program applications are scored. “If the city of Springfield is interested in getting projects approved by MHDC, there are certain points that we can get that would make applications more desirable.”

In addition to tax abatements, Hart cited the use of soft funds, which panelists defined as below-market loans without annual debt service, and waivers of fees, both of which earn points from state officials who score housing project applications.

“They just want to see that you’re leveraging funds,” she said.

Another factor: The community has to find the development desirable, and that information is partly conveyed in the city’s letter of support.

“If you do the same letter for every project, it doesn’t really help them with MHDC understanding which one’s important,” she said.

She said St. Louis and Kansas City both rank projects, and sometimes MHDC pays attention to that.

Allison agreed, noting that the program is extremely competitive. In places where municipalities understand what the state agency wants to see, projects have a better chance of getting across the finish line.

After the meeting, Jenson said the committee’s efforts go beyond a single informational meeting as it responds to a council referral – his own – from last fall.

Jenson said the committee is looking at additional resources needed from the city beyond MHDC requirements. It is also exploring ways to bring clarity to the development community about the resources that are available.

He said that the city has an opportunity to provide incentives for meeting certain thresholds. As an example, MHDC offers the maximum number of points in a category for offering 12.5 units in a development for tenants who earn 30% of area median income. The city could push the threshold to apply to 20% AMI in exchange for a certain incentive.

He emphasized that the example is only that – an illustration.

“I don’t know what the specific criteria are going to be,” he said.

Two council Finance and Administration Committee meetings are scheduled in May to establish incentives and to align incentives that can be revised periodically.

Jenson aims to have a presentation for the full council at a June workshop meeting, then to revise the proposal based on feedback received and present a resolution for adoption in July, in time for the next round of LIHTC applications.

Jenson said the committee’s work won’t have an impact on the projects that are expiring in the next five years, but instead members aim to help in the future.

“This is forward-looking,” he said. “We’re trying to minimize future possibilities for those impacts we’re experiencing now.”