HART Credit News

News

Independent study finds HART yields equivalent or better value for money (VFM).

12/05
ABROS were appointed by English Partnerships in May 2003 to undertake an independent review of the proposed Housing and Regeneration Tax (‘HART’) Credit. The review was jointly funded by the Housing Corporation and found the HART Credit yields equivalent or better value for money (VFM).

Ernst & Young Reports on Effectiveness of US LIHTC

10/04
Ernst & Young recently released a comprehensive US national study of over 7,000 LIHTC properties totaling 562,000 homes throughout the United States. Using actual operating data from these properties, Ernst & Young found continued viability.

The executive summary shows that, from a financial and operational perspective, LIHTC properties are performing very well indeed:

Average debt service coverage is 116%.

The annualized foreclosure rate is just 0.01% -- that is, 1 in 10,000. (Non-compliance rates are similarly de minimis.)

Investment benefits and returns are 1% higher than originally projected -that is, on projection and indeed just slightly ahead.

These findings confirm that using a tax credit fiscal instrument is an effective risk transfer with high compliance, features notably lacking from grant-based schemes where government must pay capital up front and can claw it back only from the property or its sponsor (in either case, imperiling the scheme's viability).

Ernst & Young's study updates a similar comprehensive report, issued in 2002, that found many of the same important feasibility metrics. Ernst & Young has graciously allowed us to forward the 2002 study, free of charge, to any UK party interested in receiving it. Click here to send us an email requesting the study.

Spending Review and HART

8/04
The recently released Spending Review (SR) is strongly promoting efficiency - doing more with less. As AHI's summary of the SR (PDF download available soon) indicates, efficiency in the affordable housing sector does not mean pound of equity per pound of government expenditure, but rather homes made affordable per pound of government expenditure. Though this metric is more complicated to compute, it is clearly more relevant to sound decision-making. Fortunately, the US has a large Federal agency that does just that.

The US Government Accountability Office (GAO) recently released a report entitled Comparing the Characteristics and Costs of Housing Programs . Using GAO's data, AHI has extracted the critical finding:

Tax credits delivered via the Low Income Housing Tax Credit program were found to be 29-32% cheaper, in terms of Federal expenditure per home created, than grant programs. Even when adjusted for equivalent affordability, tax credits were 13-20% more cost-effective per home created.

Additionally, GAO's methodology did not even count all the favorable externalities derived from tax credits as opposed to grant schemes:

Levers other capital sources;

Outsources compliance and administrative functions to the private sector;

Pays only for performance, not promises;

Exceptionally high rates of project completion with almost no defaults;

Nearly perfect clawback.

Our eight-page summary summarizes the findings and provides the relevant tables for support. The full report, a 4MB PDF, is currently available at www.gao.gov/new.items/d0276.pdf.

HART Presentation at National Housing Federation Conference

7/04
On 20 July 2004, Andrea Titterington and David Smith delivered a presentation at the National Housing Federation's 2004 national conference on development, regeneration, and maintenance. Entitled "new funding mechanisms for the future," and aimed at directors and senior managers, it highlighted:

Regeneration challenges

Property Investment Funds (PIFs), an initiative of HM Treasury modeled on US REITs, and what they might mean

HART

The session played to a standing-room-only audience that asked many insightful and probing followup questions about both PIFs and HART. View slides from the presentation (PDF download).

Joint stakeholder spending review strongly endorses HART Credit

4/04
In April, the Chartered Institute of Housing (CIH), the Local Government Association (LGA), and the National Housing Federation (NHF), who have formed an alliance to lobby for increased resources for housing, released their Joint Spending Review submission to the Office of the Deputy Prime Minister (ODPM). Noting that HM Government have proposed creating a REIT-like vehicle, the Property Investment Fund (PIF), they go on to comment (in Section 8.6):
We therefore recommend that they [PIF's] should be geared to promoting new supply in the sector, rather than to purchase of existing properties.... However, the key role that housing associations can play will not be fully realised unless Government take steps to create affordability by closing the cost-value gap either by grant subsidy or through fiscal intervention in the form of tax credits. Such credits were advocated in the Barker report and the Federation has previously endorsed, and continues to support, the specific introduction of the Housing Regeneration Tax (HART) credit.
The full report (Adobe Acrobat, 2 Meg) is available at: http://www.housing.org.uk/uploads/documents/80/pdpo2004sb01.pdf.

REITS: What's in the Box?

2/04
In this article (available as PDF download) in Social Housing, George Bull of Baker Tilly and David Smith of AHI ask what a new investment vehicle can do for UK affordable housing.

HART makes Affordable Housing Finance

2/04
In February, 2004, Affordable Housing Finance, the US's leading monthly publication focusing on affordable housing, featured HART in an article, "UK looks at establishing housing credit," that among other things quoted David A. Smith, AHI's founder, that "HART combines some of the best elements of the U.S. low-income housing, historic and proposed homeownership tax credits…. In some ways, HART improves on the LIHTC. It's much less specific in statute and calls for a faster delivery of the credits than in the United States." Smith is one of HART's designers, along with Dan Anderson, senior vice president in the Community Development Banking Group at Bank of America, Jacqueline Rogers (former Maryland Secretary of DHCD), Andrea Titterington (former CEO of Maritime Housing, Liverpool), and George Bull (partner at accountancy Baker Tilly).

This article originally appeared in Affordable Housing Finance magazine. For more information, contact Alexander & Edwards Publishing, Inc., at (800) 989-7255 or visit www.housingfinance.com.

HART debate continues in Housing Today

11/03
In the October 31 issue, Housing Today profiled an improved Atlanta, USA housing estate (free registration required). The Affordable Housing Institute's David Smith responded with a letter pointing to the public/private nature of the redevelopment and the crucial role tax credits played in the investments. His letter is printed in the November 14 issue.

HART Presented to the National Housing Federation

9/03
On 24 September, Andrea Titterington (Liverpool) and David Smith (AHI) presented a discussion of HART to the annual conference of the National Housing Federation. As representative of the independent social and affordable housing sector, NHF includes over 1,400 non-profit housing associations that collectively own or manage about 1,800,000 homes. In its annual manifesto (PDF download, see page 19) NHF explicitly endorsed HART, stating, "we will work with others to set up pilots for an adapted version of the tax credit system in the US as a means of funding new housing." View slides from the presentation (PDF download).

Housing Today article describes how tax credits work

9/03
In this article (free registration required) Housing Today describes how tax credits help US developers lever several billion dollars into social housing every year, and describes how the strategy can work in the UK.

ROOF Magazine profiles HART initiative

9/03
In this article (available as PDF download) in ROOF, AHI Founder David Smith outlines how the proposed Housing and Regeneration Tax Credit (HART) will boost affordable housing supply and deliver value for money for the government.

Maritime and EP launch tax credits study

4/03
This Housing Today article (free registration required) details research funded by Maritime Housing and English Partnerships to explore the use of tax credits as a means to boost private investment in regeneration projects.

Deputy PM John Prescott Outlines Vision for Sustainable Communities

4/03
Writing in this Housing Today article (free registration required), Prescott declares "We have the vision, we have the funding, and we have the determination for a step change." Read a summary of comments with direct bearing on the HART Credit.

UK Symposium highlighted in Estates Review

4/03
"Liverpool recently played host to a symposium of highly qualified and experienced experts from the UK and US to examine whether the American experience of affordable housing tax credits offers useful insights to explore the potential for devising new financial tools that could significantly enhance the way that housing and regeneration projects are funded in the UK." Read the full article.

US Tax Credit Excellence Awards announced

4/03
The Affordable Housing Tax Credit Coalition has announced the 2002 winners of the Charles L. Edson Tax Credit Excellence Awards. "The goal of the Awards is to acknowledge the extraordinary achievements that have resulted from this Federal housing program while promoting public awareness of the positive impact quality affordable housing has on residents and communities," said Linda Cargill, President of the Coalition.

HM Budget 2003 Addresses Housing and Tax Credits

4/03
PN 09: Improving Housing Supply and Simplifying Planning states "a step change in planning policy, further significant changes in the planning, supply and finance of housing will be required to address both demand and supply in the housing market to tackle market failures, significantly increase the responsiveness of supply to demand, and reduce national and regional price volatility." Also calls for a review of issues to "identify options for Government action, including the use of fiscal instruments."
PN 04: Protecting the Environment announces a £47 million per year Landfill Tax Credit Scheme. Also addresses sustainable housing, declaring "[t]he Government will also continue to consider the use of economic instruments to support regeneration and encourage brownfield development."

HART Credit Initiative launches website

3/03
Sponsored by Maritime Housing Association Ltd. and the Affordable Housing Institute the HART Credit Website aims to be a primary source of information and collaboration among stakeholders in the housing regeneration process.

Housing Today Article Avocates US-style Tax Credits

1/03
In this article (free registration required), Professor Christine Whitehead argues for the introduction of a housing tax credit:
"The policy with the best chance of boosting the stock of affordable housing is tax incentives for construction, allowing either tax relief or tax credits ."

HART Launches

1/03
HART Credit conceived and circulated for pre-issuance stakeholder commentary.

Office of Deputy Prime Minister offers encouragement

8/02
Liverpool symposium core faculty (George Bull, David Smith, Andrea Titterington) present findings to Office of Deputy Prime Minister, and receive encouragement to develop a specific credit product.

US-style tax break plan to boost UK regeneration

10/02
Covering the Urban Summit, this Housing Today Article (free registration required) outlines four tax-break models currently in use in the USA presented at the summit with the goal of bringing hundreds of millions of punds of private finance into urban regeneration.

Urban Summit

10/02
At the Urban Summit, Prescott speaks of the need for a step change in delivery, while Brown cites new Community Investment Tax Credit. The Credit is presented to a strong positive reaction.

Liverpool symposium evaluates new resource possibilities, endorses credits

2/02
From 11-13 February, 2002, a three-day symposium brought together transatlantic experts from the UK and the US to consider innovative and targeted ways to use tax credits and investment incentives to stimulate capital inflows into distressed or under-invested urban neighbourhoods.
Download full report.