When the 50 apartments at Azimuth 315 are finished, low-income renters could be living in one of Bend’s most expensive neighborhoods for less than $400 a month.
Azimuth, which broke ground in NorthWest Crossing in November, almost didn’t become a reality this year because of turmoil in the market for low-income housing tax credits, which are a key source of financing. And now Oregon’s affordable-housing agency and developers are scrambling to ensure that similar projects can take advantage of tax-exempt bonds, which would be eliminated by a tax-reform package passed by the U.S. House of Representatives.
“It would exacerbate a crisis we already have in Oregon,” said Tammy Baney, a Deschutes County Commissioner and member of the governor-appointed Oregon Housing Stability Council, which directs the state’s affordable-housing agency.
The House tax plan could derail financing for 1,818 affordable housing units planned in Oregon next year, said Ariel Nelson, spokeswoman for Oregon Housing and Community Services. That includes La Pine Townhomes, a 42-unit project, and Village Meadows Apartments, a 48-unit project in Sisters, both by the nonprofit developer Housing Works, she said.
Affordable housing could be affected by either version of the tax package, according to an analysis by Novogradac & Co., a San Francisco accounting firm that specializes in affordable housing, the Associated Press reported Tuesday. The two versions are being reconciled by a committee of House and Senate members before a final vote.
Lowering the corporate tax rate from 35 percent to 20 percent — a feature of both the House and Senate versions of the tax bill — would effectively devalue low-income housing tax credits and result in a loss of investor equity nationally of about $1.2 billion. That would translate into about 90,000 fewer affordable rental units over the next decade nationwide, the analysis found.
Azimuth 315 was developed by Pacific Crest Affordable Housing of Bend, a for-profit firm awarded about $1 million in low-income housing tax credits, which are paid every year for 10 years. After discounting by investors, the tax credits will cover about $8.5 million of Azimuth’s $14 million cost, Pacific Crest partner Rob Roy said.
The tax-credit market was affected soon after the 2016 election, as President Donald Trump signaled that he wanted to reduce the corporate tax rate. “There really was no market for the first quarter of the year,” Pacific Crest partner John Gilbert said.
Projects chosen in 2016 suddenly faced a gap in their financing, said Julie Cody, assistant director of the Housing Finance Division of Oregon Housing and Community Services. So the agency added $1.1 million in tax credits from the 2017 funding cycle to cover the funding gap for 11 projects already in the pipeline, including Housing Works’ Ochoco School Apartments in Prineville.
Oregon Housing and Community Services also opted to speed up its award process for 2017. Azimuth 315 was one of eight projects that received $7.9 million in low-income housing tax credits, according to the agency.
Tax-credit investors now assume Congress will pass a corporate tax cut, and the market for credits awarded under the competitive program has stabilized at around 90 cents on the dollar, Cody said.
But another type of low-income housing tax credit, which funds more than half of affordable projects nationwide, would be affected by the House tax plan. The so-called 4 percent tax credit can only be claimed by a developer if at least half of the construction is financed by private activity bonds, backed by revenue from the project. The bonds are awarded by states, with the help of local governments, for qualifying projects.
The House version would remove the tax-exempt status of the private activity bonds, making them essentially useless as a financing tool.
Developers like Housing Works are hustling to make sure they have bond financing by the end of this year, Cody said. “I think they’ll do it,” she said.
The city of Bend could use 5,000 more housing units available to people making 60 percent of the Deschutes County median income, Bend affordable housing manager Jim Long said. The median income for a family of four is $64,006, so qualifying families would earn $38,403 a year.
Azimuth’s 36 one-bedroom and 14 two-bedroom apartments are reserved for individuals and families earning 40 percent to 60 percent of the Deschutes County median income. Pacific Crest has built several affordable apartment buildings in Bend and Deschutes County for seniors only, but Azimuth is its first project with no age restrictions. West Bend Property Co., NorthWest Crossing’s master developer, wanted to bring younger people into the community, Roy said.
The name of the building comes from the northwest compass direction, Gilbert said. The site is at the end of Labiche Lane, near the intersection of NW Crossing Drive and NW Shevlin Park Road.
Azimuth 315 will have secure indoor bike storage, a fitness room, reading room and two general-purpose meeting rooms, Gilbert said. It will also have a playground and community garden, and apartments on both sides of the building will have mountain views, he said.
Azimuth would not have been possible without the city of Bend granting a tax exemption and making a $600,000 loan from affordable-housing funds, Roy said.
Pacific Crest, which charges a $1 million developer fee, is also making a loan to the project, Gilbert said.
The apartments must remain affordable for 60 years, so Pacific Crest has an incentive to make the building as efficient as possible, Roy said. The company separately finances solar panels, which will offset half the building’s electricity load and three-quarters of the water-heating load, he said. The three-story building will have 12-inch thick exterior walls, he said.
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