How have tax credit investment funds worked?
Typically, tax credit investment funds have been established to allow multiple investors to diversify their investment into multiple real estate developments.
St. Louis Equity Fund has established funds, received investments, and underwritten those developments that best matched the needs of the investors with the improvements required of communities.
Once a project met all of the criteria of the fund, the fund formed a limited partnership with the developer and became the limited partner in the partnership. The limited partner used a loan to bridge its investment over a longer term, allowing the investor to stretch their investment over a period of time. The developments generated tax credits and other tax benefits annually that were split between the limited and general partners typically at a 99% to 1% ratio, respectively. Due to tax credit regulations, the limited partnerships must exist for a period of 15 years after construction completion.
What are some of the properties in the St. Louis Equity Fund's portfolio?
For a complete listing of the St. Louis Equity Fund real estate portfolio, please see our Real Estate Development section.
Who controls the St. Louis Equity Fund?
St. Louis Equity Fund. is owned by its investor members. Members are the banks and corporations that have invested in any of the St. Louis Equity or Housing Missouri Equity Funds since 1988. The members elect a Board of Directors at their annual meeting. In addition to the Board, SLEFI has an Investment Committee, Finance Committee, Audit Committee, and Governance and Nominating Committee to provide oversight to the officers of the corporation. The officers provide daily management for the company and its employees.
What is a low-income housing tax credit and how does it help finance affordable housing?
In 1986, Congress passed a tax relief act that included a clause authorizing the distribution of tax credits through state housing agencies to encourage private investment in affordable housing. Annually and based upon a per capita dollar amount of credit, each state is authorized to distribute through a competitive process tax credits to developers qualifying under certain terms. Tax credits are then marketed and sold to investors who provide cash equity to the project to help finance construction or rehabilitation. Tax credits are allocated in equal amounts over a period of ten years, and the development must remain affordable to and be occupied by qualified low-income families for a period of fifteen years called the tax credit compliance period. Since the early 1990s, States have typically required an additional 15 years of affordability after the tax credit compliance period has ended.
In effect, the tax credit generates equity that replaces debt financing as a means to finance construction. Since there is less debt required to finance construction, the rents charged to residents can be lower. In the simplest terms, this is how the tax credit helps provide affordable places to live.
What is the typical rent for a low-income housing tax credit unit?
Rents in the St. Louis Equity Fund's low-income real estate portfolio range from $325 to $625 per month.
What is an historic preservation tax credit and how does it help finance the rehabilitation of historic buildings?
The Historic Preservation Tax Credit is sold by developers to investors in a similar way as the low-income housing tax credit, but similarities end there. In order to qualify for the credit, buildings must be National Historic Landmarks listed in the National Register and contribute to National Register Historic Districts and certain local historic districts. Properties must be income-producing and must be rehabilitated according to standards set by the Secretary of the Interior.