Andrew Dehan 3 minutes
If you’re interested in developing low-income housing and you’re not super experienced, it’s best to start small. Take what you’ve learned from one property or situation and apply it to the next.
If you’re already in the developing business, there are still a few things you can learn that apply to affordable housing. Here are a couple tips to get started, whether you’re a new developer or a seasoned pro.
Buy Cheap Properties
The best way to begin is to find bargain properties in areas that have a lot of need. Searching on HUD homes, HomePath homes and foreclosures are great ways to get started.
Work with a real estate agent or REALTOR® who is familiar with the area. They can be great sources of information to find bargain properties that are good candidates for renovation.
Expect that these cheap properties will need repairs. If you’re an experienced developer, you probably already know this, but it’s essential to have contacts you can call to inspect the property as well as make the necessary repairs.
Be able to calculate if the purchase price plus repair costs is worth the investment. By starting with a cheap property, you can dip your toe into developing low-income housing while potentially taking on less risk.
Learn About LIHTC, Section 8 And HAP
You need to familiarize yourself with different government incentives for affordable housing and its development. Section 8 is the HUD voucher program that subsidizes the monthly rent for low-income renters.
If you’re a nonprofit developer, you should especially be aware of Section 202 and Section 811. Section 202 provides an interest-free capital advance (or loan) to developers building affordable housing for the elderly. Section 811 provides an interest-free advance, as well as operating subsidies, to developers of affordable housing for those with disabilities.
Developers should also be aware of the Low-Income Housing Tax Credit (LIHTC). This tax credit program subsidizes the development of affordable rental properties. Many property types are eligible. Further eligibility is determined by the income levels of the tenants.
Checking with the state and local governments is another good call. These agencies may have additional incentives or resources to encourage affordable housing development. You may also make connections on a community or local level to help sponsor the build.