LIHTC developer here (not in Illinois). Pretty spot on observations. Never truly considered how bizarre twinning is until now, appreciate the new perspective.
There's no perfect way to control LIHTC project costs, so more tools and point categories is probably warranted. Cost caps can be overly rigid and require projects to build to the bare minimum. They can also box out urban projects where construction markets are more expensive. Per-unit cost caps are unhelpful because they can incentivize bigger units (ie bedrooms are cheaper than kitchens and bathrooms), though you could argue this helps families. A LIHTC award is often first money into a deal. Because it's early and predevelopment phases are getting ridiculously long, costs change/inflate. This makes accurately projecting hard costs when submitting a LIHTC application notoriously challenging. LIHTC developers lobby allocating agencies against adding points for cost projections.
Though there's no silver bullet to cost control, it's pathetic LIHTC application agencies don't even try. These organizations are handing out 10s of millions annually and waste their leverage on pointless point categories that developers know how to game.
Hey thank you! I realize LIHTC developers are in an uncomfortable spot here -- frustrated by high costs, but also wary of rules that would make it even harder to get projects done. It's also a great point about per-unit caps -- we want to be producing 2 and 3-bedroom units, and a points-based scoring system needs to take those incentives into account. We shouldn't always be incenting the cheapest per-unit projects! But we should be rewarding developers who control, or drive costs down.
Honestly? I haven't heard much that would indicate there's a lot of corruption or shady dealing here -- especially at the state level. That doesn't mean it isn't happening, and I'm not going to rule anything out (this is Illinois/Chicago). But LIHTC is a pretty heavily scrutinized federal program. Most of the cost bloat here seems to be a result of a failure to prioritize and make hard choices, rather than corruption.
From my experience in the LIHTC space in other jurisdictions, the "graft" is built into the system and is reflected by the Byzantine processes. Many markets only have a handful of developers that are savvy enough to present themselves as eligible to receive tax credits from the qualified authority (in some egregious cases, these developers were also authors / advisors of the 1986 tax reform itself who moved into real estate development after careers in politics).
Yeah this a very good point. If a process is so intractable/difficult to navigate, it can produce some of the same outcomes as corruption: high costs, a small number of repeat players, and limited trust on the part of everyone else. Doesn't mean someone's breaking the law - but it's still a bad outcome.
LIHTC developer here (not in Illinois). Pretty spot on observations. Never truly considered how bizarre twinning is until now, appreciate the new perspective.
There's no perfect way to control LIHTC project costs, so more tools and point categories is probably warranted. Cost caps can be overly rigid and require projects to build to the bare minimum. They can also box out urban projects where construction markets are more expensive. Per-unit cost caps are unhelpful because they can incentivize bigger units (ie bedrooms are cheaper than kitchens and bathrooms), though you could argue this helps families. A LIHTC award is often first money into a deal. Because it's early and predevelopment phases are getting ridiculously long, costs change/inflate. This makes accurately projecting hard costs when submitting a LIHTC application notoriously challenging. LIHTC developers lobby allocating agencies against adding points for cost projections.
Though there's no silver bullet to cost control, it's pathetic LIHTC application agencies don't even try. These organizations are handing out 10s of millions annually and waste their leverage on pointless point categories that developers know how to game.
Hey thank you! I realize LIHTC developers are in an uncomfortable spot here -- frustrated by high costs, but also wary of rules that would make it even harder to get projects done. It's also a great point about per-unit caps -- we want to be producing 2 and 3-bedroom units, and a points-based scoring system needs to take those incentives into account. We shouldn't always be incenting the cheapest per-unit projects! But we should be rewarding developers who control, or drive costs down.
How many points does one get for wetting one’s beak?
Honestly? I haven't heard much that would indicate there's a lot of corruption or shady dealing here -- especially at the state level. That doesn't mean it isn't happening, and I'm not going to rule anything out (this is Illinois/Chicago). But LIHTC is a pretty heavily scrutinized federal program. Most of the cost bloat here seems to be a result of a failure to prioritize and make hard choices, rather than corruption.
From my experience in the LIHTC space in other jurisdictions, the "graft" is built into the system and is reflected by the Byzantine processes. Many markets only have a handful of developers that are savvy enough to present themselves as eligible to receive tax credits from the qualified authority (in some egregious cases, these developers were also authors / advisors of the 1986 tax reform itself who moved into real estate development after careers in politics).
Yeah this a very good point. If a process is so intractable/difficult to navigate, it can produce some of the same outcomes as corruption: high costs, a small number of repeat players, and limited trust on the part of everyone else. Doesn't mean someone's breaking the law - but it's still a bad outcome.