TDHCA’s tax credits expected to generate $79.3 million to rehab 13 HACEP properties through new federal initiative

(AUSTIN) — The Texas Department of Housing and Community Affairs (“TDHCA”) has approved the issuance of up to $8.4 million in housing tax credits to the Housing Authority of the City of El Paso (“HACEP”) and its Paisano Housing Redevelopment Corporation affiliate to help finance the substantial rehabilitation of 13 HACEP rental properties, an undertaking which will impact 1,590 units.

Once the tax credits are sold to private investors, this historic transaction is expected to generate as much as $79.3 million in private equity to be used in this initiative. HACEP would use this equity along with approximately $125 million in proceeds from a private activity bond issuance by the Alamito Public Facilities Corporation to complete the project.  It would be the largest single issuance of housing tax credits ever approved by TDHCA.

Rehabilitation work will involve the complete renovation of living spaces, asbestos and lead-based paint abatement, the removal of swamp coolers for the installation of central heating and air conditioning equipment, and accessibility improvements, among many others.

“HACEP will be undertaking a new and unique program that ultimately will benefit thousands of Texans who otherwise might face living in substandard housing.  The benefits, ranging from asbestos abatement to providing improved accessibility and modern climate control, are very real benefits to these residents,” said Tim Irvine, TDHCA Executive Director.

This transaction is among the first and largest in Texas under the Rental Assistance Demonstration (“RAD”) Program, a new program administered by the U.S. Department of Housing and Urban Development (“HUD”), which oversees public housing authorities.

Conventional public housing is not permitted to carry any debt, meaning housing authorities have limited options to repair or rehabilitate existing properties. The RAD Program, however, enables housing authorities such as HACEP to access financing, including tax credits and the use of a private sector investment component to carry out this initiative.  

“Our goal is to maximize the investment for affordable housing in El Paso, and our success today means that El Paso will receive the largest influx of funds to build affordable housing units in decades,” said HACEP Executive Director Gerald Cichon. “Our hats are off to our delegation of elected leaders and TDHCA for their support as HACEP prepares to revitalize more than 6,000 public housing units over the next five years through the Rental Assistance Demonstration program.” 

The federal Housing Tax Credit Program is the state’s primary means of incentivizing the investment of private capital in the development of affordable rental housing. Developers and their investment partners use the credits to offset their federal tax liability on a dollar-for-dollar basis in exchange for the construction or rehabilitation of rental units offering a reduced rent over an extended period of time.