By Sean Ryan
A fickle affordable-housing market is telling developers to find the right location or the tax credits that pay for projects will be worth little more than the paper they’re printed on.
That market fact is encouraging developers in big cities such as Milwaukee, while developers in less-populated areas wait for a friendlier business climate.
Developers in Milwaukee are finding it easier to locate banks or investors to buy the tax credits, said Ted Matkom, Wisconsin market president for Gorman and Co. Inc., Oregon. Gorman this month will apply for tax credits for five projects, three of which are in Milwaukee.
“We expect to have a lot of competition,” Matkom said, “but there’s a lot of credits, too.”
The state awards tax credits to support affordable-housing projects. But developers, in order to raise construction money, must find a bank or investor to buy the credits.
As Gorman spends the month refining its project plans in the city, Lyndon Jackson, managing member of Affordable Housing Development LLC, will keep looking for someone to invest in his Fort Atkinson project. The Stoughton-based developer received state tax credits last year to build the 54-unit Countrywood Apartments, but he said he cannot get a bank to invest because investors are focused on cities such as Madison and Milwaukee.
With a March 26 deadline approaching to apply for the 2010 tax credits, Jackson said he will stay on the sidelines because it doesn’t make sense to pay up to $100,000 for preliminary planning just to win tax credits that might not sell.
“I could go after additional,” Jackson said, “and I’ve got a great site in another small community.”
The Wisconsin Housing and Economic Development Authority has $42 million in tax credits available this year. The state, which usually accepts project applications for the tax credits in February, pushed back the date this year to give developers that received credits in 2009 more time to find investors before more credits hit the market, said Kate Venne, WHEDA communications coordinator.
All 13 projects that received credits in 2008 have investors, but, as of March 1, only 14 of the 53 projects that received awards in 2009 have investors, she said. It is difficult to predict whether competition in 2010 will be less intense because some developers have unfinished projects on the books, Venne said.
“I think it really comes down to whatever developer you are talking to,” she said, “and what their appetite is.”
Gorman is still hungry for projects, Matkom said, because there are more opportunities to sell credits for projects in urban areas. In Milwaukee, Gorman still is working on the Villard Square project, which received $768,000 in tax credits in 2009.
The greatest demand to buy credits comes from national banks forced by federal law to invest money in areas where the banks have a lot of customers, Matkom said. The federal law is driving banks to invest in tax credits in big cities.
Gorman’s Milwaukee projects include renovating the former Jackie Robinson Middle School into 64 senior-housing apartments and building 14 single-family houses on the property, Matkom said. The company is seeking zoning approval from the Milwaukee Plan Commission on Monday for the Atkinson Square project, a new building planned for 1527 W. Atkinson Ave. that will have up to 60 apartments.
Jackson said his work in Fort Atkinson does not have the same appeal.
“It used to be that as soon as you got the tax credit award,” he said, “your phone would ring off the hook.”