Quality: 4 - País

Low Income Housing Tax Credit in the United States

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Low Income Housing Tax Credit in the United States

Mismatches
Policies and regulations

Main objectives of the project

In the US, most housing subsidies are provided indirectly via the tax system rather than direct public spending. One of the tax subsidies provided for affordable housing is Low-Income Housing Tax Credit (LIHTC) which were introduced by the Tax Reform Act in 1986.

Date

  • 2018:

Stakeholders

  • Promotor: United States government

Location

Continent: North America
Country/Region: United States of America

Description

Since their introduction LIHTCs have helped to fund three million units of affordable housing. They cost the United States government some USD 9.9 billion per year in tax foregone.[1]

LIHTCs are available to both non-profit and for-profit housing developers. Once a housing developer has identified a site and been allocated tax credits, capital is raised by selling the credits to investors. Investors include banks, which have financed 43 per cent on average, 30 per cent from government-sponsored enterprises such as Fannie Mae, 19 per cent from insurance and other finance companies, and 8 per cent from non-financial companies. Tax benefits only flow to investors if the scheme remains compliant for 15-30 years with the rules set when the tax credits were allocated.[2] Notably LIHTCs usually finance around 42 per cent of the costs of a typical housing project. Therefore, to deliver affordable housing this finance must be complemented by public grants and lower-cost financing.

To help fund additional dwellings from the USD 10 billion provided via LIHTC, since 2018 LIHTC projects can offer dwellings with higher income ceilings – up to 80 per cent of the local median income, with rents at 30 per cent of this level. Other dwellings in the same housing development must have lower income ceilings and the overall average of all dwellings in the development must be 60 per cent of area median income.[3]

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Housing Finance Agency of Ireland

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Housing Finance Agency of Ireland

Policies and regulations
Financing
Promotion and production
Ownership and tenure

Main objectives of the project

The Housing Finance Agency (HFA) was established in 1982 and is a public limited company wholly owned by the Irish government.

Date

  • 1982:

Stakeholders

  • Promotor: Housing Finance Agency (HFA)

Location

Continent: Europe
Country/Region: Ireland

Description

Its mandate is to provide loan finance at the lowest interest rates possible to local government and non-profit sector housing associations for social housing provision, to Higher Education Institutions for student housing provision and for mortgage lending to low-income home purchasers.

The Agency sources its finance from two European Union public banks – EIB and CEB – and from short-term deposits from local government. At the end of 2020, the outstanding loan book of HFA was EUR 5.18 billion. The HFA is self-financing – a small margin is added onto its cost of funds to cover its administration costs – so it does not receive any government subvention.

In recent years, HFA has played a key role in funding the expansion of housing support for low-income households in Ireland. In 2010 it began to offer loan finance to non-profit sector social housing providers which had previously been funded primarily by government grants. This significantly increased the volume of finance available to these housing providers and enabled them to greatly increase their output. Securing long-term fixed-rate finance enabled the HFA to offer fixed-rate loans to non-profit social housing providers. This eliminated interest rate risk, which was a key concern for them.[1]

This experience of drawing on HFA loan finance has encouraged some non-profit social housing providers to use private banks and capital markets. HFA has also used these fixed-rate EIB and CEB loan facilities to offer 20-year fixed-rate, low-interest mortgages to low-income Irish home buyers[2]. Long term fixed-interest mortgages are not provided by commercial mortgage lenders in Ireland and this type of loan significantly increases the affordability and predictability of mortgage payments, so it is particularly beneficial for low-income households[3].

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Right of occupancy housing in Finland

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Right of occupancy housing in Finland

Policies and regulations
Financing
Promotion and production
Ownership and tenure

Main objectives of the project

Right-of-occupancy housing [1] is a mix of renting and homeownership. Under this model the occupier must first pay a right-of-occupancy payment, generally amounting to 15 per cent of the purchase price.

Date

Stakeholders

  • Promotor: Housing Finance and Development Centre of Finland (ARA)

Location

Continent: Europe
Country/Region: Finland

Description

This can be used as security for a mortgage and attracts mortgage interest tax relief. In addition, the residents also pay a monthly residence charge for their right to occupy the dwelling. Right-of-occupancy housing is also subject to a monthly residence charge to cover capital expenses and upkeep costs. The amount of the residence charge is based on the cost recovery principle and may not exceed the average market rents of similar dwellings in the same locality. Right of occupancy dwellings can never be bought outright but the occupier has the right to live there permanently.

There are restrictions on the resale of right of occupancy housing. These dwellings can only be sold to a buyer approved by the local municipality. When occupiers of a dwelling of this type decide to give up their right of occupancy, they receive a refund of their right-of-occupancy payment, plus an index increment corresponding to the change in the building cost index.

Anyone aged 18 or older may apply for a right-of-occupancy apartment. There are no income restrictions, but applicants cannot own another dwelling in the same region or have the funds to purchase one. This form of housing has been financed mainly with state-subsidized housing loans or interest subsidy loans.

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State Housing Development Fund of Slovakia

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State Housing Development Fund of Slovakia

Policies and regulations
Financing
Promotion and production
Ownership and tenure

Main objectives of the project

The State Housing Development Fund (SHDF) of Slovakia was established in 1996 as a revolving fund to finance the priorities of the Government of Slovakia defined in the State Housing Policy Concept. It is an independent entity supervised by the Ministry of Transport and Construction of the Slovak Republic.

Date

  • 1996:

Stakeholders

  • Promotor: Štátny fond rozvoja bývania (SFRB)

Location

Continent: Europe
Country/Region: Slovakia

Description

The SHDF provides long-term loans on favourable terms. These cover up to 100 per cent of housing acquisition costs and are available for terms of up to 40 years at interest rates of between zero and 2 per cent. The loans are available for the:

Construction or purchase of dwellings by qualified households – available to people with a disability, families with young people and former residents of orphanages
Renovation or modernization in multi-apartment buildings and family houses
Construction or purchase of social rented dwellings by municipalities and non-profit organizations, and construction of for-profit rented housing by private companies
Construction and refurbishment of social service facilities by municipalities or private companies
Acquisition and servicing of land for social housing by municipalities and also land used by for-profit rented housing by private companies
Acquisition of a lodging-houses by municipalities or by private companies.

SHDF has made a significant contribution to improving the supply and quality of housing in Slovakia. There was a serious shortage of good quality housing, particularly for low-income households, following transition of Slovakia in the early 1990s. This was due to low levels of new housing supply from the market and the privatization of the majority of rented dwellings, which had previously been owned by the state during the communist period.[1] Between its establishment and 2016, the fund supported the provision of 40,858 social housing units, which is one of the highest rates of new social housing output achieved in post-communist countries during that period.[2] Between its establishment and 2018, the SHDF has funded or co-funded the renovation of 25 per cent of the total Slovakian housing stock. Take-up of its loans by municipalities is helped by the fact that these are not included in general government debt.

SHDF is also significant in institutional terms and in terms of the housing finance expertise it can provide. Its extensive experience in financing housing meant that it was ideally placed to act as a special purpose financial intermediary to administer the EU JESSICA programme for energy-efficient renovation of dwellings when it was established in 2013

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National Housing Agency of Albania

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National Housing Agency of Albania

Mismatches
Policies and regulations
Financing
Ownership and tenure

Main objectives of the project

The National Housing Agency (NHA) of Albania was established in 1993 and is a state-owned enterprise.
It is legally mandated to conduct the following tasks:

Financing and entering contracts for construction, completion, and sale of dwellings
Conducting research and advising on housing and urban design
Sourcing finance to implement its mandate
Cooperating with municipalities to meet their obligations in the housing sector
Providing low-cost housing and selling it with favourable conditions for families who need housing.

Date

  • 1993:

Stakeholders

  • Promotor: National Housing Agency (NHA)

Location

Continent: Europe
Country/Region: Albania

Description

NHA was established with the technical assistance of the United States Agency for International Development (USAID) and a World Bank loan to complete the construction of some 6,000 – 7,000 apartments. These were started before 1990 and were left unfinished after the fall of the communist regime. NHA was initially established to manage this loan, the state budget for housing, and other sources of financing. However, in the years following its establishment, NHA accumulated funds from selling apartments to the beneficiaries and subsequently began to use these funds as a revolving fund. This enabled NHA to become self-funding and thereby financially independent from government from 2007 onwards.

NHA now uses accumulated funds to provide new affordable housing and funds from selling this are then invested in new apartments. To start a new project, NHA signs an agreement with the mayor of a city. An agreement is signed only if the municipality assigns a plot of land to NHA. In addition, the municipality may also be required to invest in the land-servicing infrastructure required to construct the dwellings, and to reduce related municipal taxes and fees. The selling price of dwellings reflects the cost of construction, including the price of the land and 4 per cent overhead costs, and of land servicing.

Purchasers of dwellings are selected by municipalities on the grounds of low income and ability to afford the dwelling purchase price. Purchasers can buy with a bank loan or repay NHA in instalments. Loans and repayment in instalment agreements generally have a term of 15-25 years and attract 3 per cent interest.

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Affordable rental scheme in France – using private homes for social tenants

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Affordable rental scheme in France – using private homes for social tenants

Mismatches
Policies and regulations
Ownership and tenure

Main objectives of the project

Sometimes tax incentives are provided to investors in rental housing regardless of the rent-setting or allocation mechanisms being used. However, in France, the “Louer abordable”[1] (affordable rental) scheme attempts to channel some of this investment into providing additional rental housing for households eligible for social housing, by providing tax and other benefits to investors. This scheme has existed in various forms for about thirty years. It currently secures around 9,000 additional affordable dwellings each year and has thus far accumulated a dedicated stock of 100,000 dwellings provided under this tax framework.

Date

  • 2017:

Stakeholders

  • Promotor: Agence Nationale pour l’Amélioration de l’Habitat (ANAH)

Location

Continent: Europe
Country/Region: France

Description

In its most common form, the Louer abordable sees an owner of a dwelling sign a rental agreement (a “louer mieux” contract) with the Agence Nationale pour l’Amélioration de l’Habitat (ANAH)[1] – the national agency which manages the scheme. As part of this agreement, the owner hands over management of the dwelling to an approved ‘social rental agency’ for a fixed period, usually either six or nine years, though this can be extended after the end of the initial contract if both parties agree.

From the perspective of potential tenants, renting a dwelling provided under this programme is similar to renting a ‘traditional’ social housing unit. Eligibility is determined primarily based on income, but the maximum income allowable varies depending on household size and region.[2] In terms of the tax benefits available to landlords who lease their property under the Louer abordable scheme, between 15 per cent and 85 per cent of the rent can be tax free. Higher rates of tax incentives are available to landlords who rent to those on the lowest incomes, with less generous tax breaks available if the property is rented to those on medium incomes. The geographic location of the property is also considered, with higher tax relief in higher-demand areas. The rent that can be charged is fixed by law and varies depending on factors such as size and location of dwelling.

It is also important to note that in the French system, tax breaks only apply in instances where rent is treated as “property income” and not as “industrial or commercial profits”.[3] In this way, the Louer abordable scheme is attractive for small scale individual investors rather than large corporate investment vehicles.

The Louer abordable scheme also has an important environmental element. Should a property need to undergo renovation works, the owner can benefit from various financial supports provided by ANAH, including a lower VAT rate on works and tax credits. To qualify, the renovated dwelling must meet specified minimum-energy standards. In any case, landlords in France must now offer minimum standards of thermal comfort to legally rent their dwelling.

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Bausparkasse system in Germany – building societies as a secure source of finance

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Bausparkasse system in Germany – building societies as a secure source of finance

Mismatches
Policies and regulations
Financing
Promotion and production

Main objectives of the project

Building societies, or bausparkassen, play a vital role in housing finance in Germany and Austria, providing a significant share of residential mortgage loans. Bausparen involves fixed, below-market rates on savings and loans, creating a closed circuit to protect customers from market volatility. These institutions are regulated under the German Banking Act and Bausparkassen Act, ensuring trust and attracting long-term savings. Similar institutions are emerging in other countries. German Landesbausparkassen are public banks operating at the sub-national level, focusing on low-interest residential mortgage loans. They utilize closed-contract savings and loan circuits funded by long-term savings and amortization payments. Bauspar loans are complemented by government savings and tax incentives, offering predictable interest rates and supporting home purchase financing.

Date

  • 2013:

Stakeholders

Location

Continent: Europe
Country/Region: Germany

Description

In contrast to their decline in many countries, building societies (german: bausparkassen) have remained important to the housing finance needs of countries such as Germany and Austria, where they provide a very large share of residential mortgage loans. Bausparen (contractual savings) is characterized by fixed, below-market rates on savings and subsequent loans. The closed circuit of savings and loans attempts to insulate customers from financial market volatility and members get stable loans at a predetermined, fixed rate of interest. Special regulation and tight supervision are considered vital to their success. In Germany Bausparkassen are credit institutions and fall under the German Banking Act and the Bausparkassen Act, which defines them as specialized credit institutions. They are closely supervised to build savers’ trust and attract savings over long periods to ensure that they will eventually be able to obtain a loan.[1] Such institutions are also growing in other countries including Croatia, Czechia, Hungary, Slovakia and Kazakhstan.

In Germany, bausparkassen are either privately owned, or publicly owned by federal or provincial governments. German Landesbausparkassen (https://www.lbs.de/) are public savings and loans banks which operate at the sub-national level and focus on low-interest residential mortgage loans. Their system involves closed-contract savings and loan circuits, where loans are funded by long term savings and amortization payments. [2] Bauspar loans are funded by contractual savings schemes, typically of seven years, which can be complemented by government savings and tax incentives. Such loans are long term, have fixed predictable interest rates and typically complement other loans financing home purchase.

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Ethiopia – JIFAR Association

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Ethiopia – JIFAR Association

Main objectives of the project

Ethiopia, located on the Horn of Africa, is rich in archaeological vestiges and is the second most populous country in Africa. Oromia, the largest region in Ethiopia, is known for its highlands and agricultural advantages. However, due to internal conflicts and drought, Oromia is facing a significant population emigration, leaving families in dire conditions. The JIFAR Association aims to provide aid, including nutrition, medical assistance, and education, while constructing sustainable villages using local materials and traditional techniques. Your contribution is crucial in saving lives and helping people regain their dignity and self-sufficiency.

Date

Stakeholders

  • Promotor: JIFAR Association

Location

Continent: Africa
Country/Region: Ethiopia

Description

Cradle of humanity, Ethiopia is located on the Horn of Africa, crossed by the Great Rift Valley, there is an archaeological vestige more than 3 million years old, including the oldest hominids (Lucy) 3.18 million years old and Ardipithecus Kadabba, a 5.2 to 5.8 million year old hominid. Second most populated country in Africa, 115 million inhabitants, 85% of whom are under 20, Ethiopia has common borders with Eritrea (former province) to the north, Somalia to the east-south-east, Sudan to the northwest, South Sudan to the west-southwest, Kenya to the south and the Republic of Djibouti to the northeast.

Oromia is the largest region of the country (353,960 km2) as well as the most populated, the administrative capital of which is Addis Ababa, other cities such as Jimma, Welega, Haramaya and Ambo are home to the largest universities. Mainly made up of highlands, Oromia is known for the origin of coffee and its biodiversity, a climatology that favors agriculture all year round.

Despite all these advantages and in the absence of rational management of natural resources, Oromia is today experiencing one of the largest emigrations of its population in the world, caused by internal armed conflicts and persistent drought.

This emigration has thrown hundreds of thousands of families, women and children, onto the roads, who find themselves without shelter, without food or medical aid, left to fend for themselves in inhuman conditions.

JIFAR Association is a non-profit association, with a humanitarian vocation, founded by friends of Ethiopia including the Bon-Abajobir Abajifar family, which aims to come to the aid of the population of Oromia thanks to aid from all nature (nutritional, medical and educational), and the construction of integrated villages with permanent habitats built from biosourced materials (BTC, rammed earth, wood, bamboo, etc.) and local traditional know-how. Modular and autonomous, equipped with devices for managing natural resources and recycling waste, these scalable and modular habitats adapt to welcoming families of all profiles.

Your contribution to our action is dear and essential to us because it saves thousands of souls from famine and despair, by offering them the means to develop their human resources and the acquisition of self-sufficiency capable of restore their dignity and taste for life.

Authors:

Housing that is produced and housing that is needed

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Housing that is produced and housing that is needed

Mismatches

Main objectives of the project

A recent report highlights the housing crisis in Ghana, with an annual need of 70,000 units and a deficit of 250,000 units. Current delivery rate meets only 21% of demand. Housing is expensive, and low incomes make it unaffordable for many. Even low-cost government housing is beyond the reach of most households. The main obstacles include high land costs, financing challenges, expensive mortgages, inadequate infrastructure, complex approval procedures, limited building materials, institutional coordination issues, and governance for shelter provision. The goal is to provide affordable and sustainable housing with infrastructure and address these challenges by improving land supply, extending infrastructure development, promoting local building materials, and increasing access to credit.

Date

  • 2010: Construction

Stakeholders

  • Promotor: UN-HABITAT

Location

Continent: Africa
Country/Region: Ghana

Description

A recent report, Housing as a Strategy for Poverty Reduction in Ghana (2010), highlights how the Ghanaian housing problem is ‘a national development crisis’ as there is a current annual need of 70,000 units, in addition to the accumulated deficit of 250,000 units ‘needed to de-crowd urban households from over 10 to 7’ occupants per house. In the coming twenty years an average annual delivery of 133,000 is needed, far more than the current delivery rate of only 28,000 units (equating to only 21 per cent of demand). 

Housing in Ghana is simply too expensive and incomes are too low. A low-cost government housing project house costs a minimum of 9,000 USD. However, this is prohibitively expensive for low-, and even many middle-income households. The report states ‘given the current minimum wage is 1.3 cedis per day (0.87 USD), it will take someone on the minimum wage 17 years to service the loan, excluding interest, and committing his or her entire salary to it’. 

Therefore, a quick calculation indicates that if he or she spends half their income on servicing the loan (still a considerable proportion of income), it will take 34 years to pay off the principal only. Furthermore, this assumes he or she has formal, reliable fixed employment contract, has the required down-payment, and has the credit worthiness to secure a loan in the first place, all of which are not common for many Ghanaian households. In Ghana and throughout Africa, even for a ‘low-cost’ government house, there are evidently many obstacles to obtaining and retaining housing that households can afford. 

The most vulnerable groups are the urban and rural poor, most of whose houses are built with poor quality materials and with little or no basic services and infrastructure, such as adequate drainage and waste disposal systems. Key factors hindering the effective delivery of housing in Ghana include the following: 

The cost of land and its accessibility; 
Financing; 
The high cost of mortgages; 
Infrastructural development; 
Development approval procedures; 
Availability and cost of building materials; 
Institutional coordination; 
Governance for shelter provision.  

Therefore, the ultimate goal of the country’s housing policy is to provide adequate, decent and affordable housing that is accessible and sustainable with infrastructural facilities to meet the needs of Ghanaians. This will be complemented by the following policies that address the challenges listed above. 

Improve the supply of serviced land available for housing, especially for the target groups. 
Extend infrastructural development to all parts of the country and ensure access to all citizens through a clear infrastructure policy and development programmes. 
Develop, produce and promote greater use of local alternative building materials of acceptable quality to effectively respond to the housing construction needs of the majority of the country’s population. 
Provide greater access to credit, especially for the target groups. 

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Affordable Housing Supply Programme of Scotland

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Affordable Housing Supply Programme of Scotland

Mismatches
Policies and regulations
Promotion and production
Ownership and tenure

Main objectives of the project

Date

  • 2021: Construction

Stakeholders

  • Promotor: Department of Social Justice, Housing and Local Government
  • Promotor: Government of Scotland

Location

Country/Region: United Kingdom

Description

The Scottish Government in the United Kingdom has developed strong capabilities in needs-based strategic planning for housing grant allocation and delivery. It has established an Affordable Housing Supply Programme to deliver 50,000 affordable homes, including 35,000 for social rent, between 2016 and 2021. It recently published an updated “Housing to 2040” policy statement, which aims to deliver an additional 100,000 affordable homes, including 70,00 social rental homes, by the first half of 2032. By working with local authorities, the Scottish Government has channelled increased capital investment to address well-evidenced and locally established housing needs. It has also created a dedicated Housing Infrastructure Fund to address development blockages. Furthermore, the Government continued to employ funds to renovate vacant dwellings and established a new fund to increase affordable housing in rural and remote island areas.

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