Facing affordable housing needs that far outstrip available public resources, New York City’s Housing Development Corporation created a financing approach that substantially stretches the amount of available funding to support more development than would otherwise occur.
The approach involves a bifurcated structure in which only the low income units in a mixed-income project are financed with tax-exempt private activity bonds and Low-Income Housing Tax Credits, greatly reducing the volume cap expended for the affordable units, and enabling further redistribution to finance more units in other projects. In addition, the process reduces compliance burdens that often accompany mixed-income structures.
Before the Bifurcated Structure was created, high cost mixed-income projects competed with more affordable projects for volume cap, and in certain years both mixed-income and low- income projects had to be deferred until future years when more volume cap became available. Although resource allocation will always play a key role in managing pipeline, the use of the Bifurcated Structure means the city can ensure that more affordable housing is financed even with limited resources.