Second grant will go forward for housing tax credit incentive
A second idea for Henderson to benefit from a national tax credit incentive for affordable housing is to build a subdivision of 55 new single-family homes that would market on a sales model much like rent-to-own, said developer Dennis Tharrington.
At a recent meeting of the Henderson City Council, Tharrington outlined his plan to apply for the tax credit grant that is awarded by North Carolina authorities. If awarded, he would seek to develop 55 more homes at Carey Chapel Crossing, a subdivision currently of 13 homes at Ashmont Lane, off of Vicksboro Road.
If the build progresses, the momentum might result in more housing starts at Carey Chapel Crossing, a subdivision that is slated to one day contain a total of up to 160 developed lots.
“This would add 55 homes to what is already there,” Tharrington said. “The difference with this development idea is that all of ours would be single-family.”
Tharrington said he wanted council support to put his idea on the table as another alternative for a possible grant award. The tax credit program authorities approve no more than one development per county per year for an award. His would be the second proposal, to compete with an earlier request for the grant.
He added that he means no ill will toward the first applicant for the grant: an Alabama-based developer’s idea for an eight-building, 40-unit rental townhouse complex proposed for six acres off East Andrews Avenue.
Tharrington said a difference with his affordable housing plan is that it would develop affordable home ownership. Other developments awarded in the past and that have been proposed recently are primarily for rental housing in Vance County.
“Homeownership is a problem in Vance County,” Tharrington said. “If I can get this grant, people can live in these homes and eventually own them. We are making that a part of our application.”
The rental agreement would include a clause that works much like cliff vesting in retirement plans: if rented for a pre-determined term, usually 15 to 18 years, the renter would at that point own about half of the equity of the home. Additionally, an option would be available for the renter to finance purchase of the rest of the property’s equity, usually working through a bank loan.
Henderson City Manager Ray Griffin asked if the agreement would include any equity for the renter if they left before the agreed term.
“If they leave after 10 years, do they get equity back out?”
Tharrington said that under the terms of the rental agreement, they would not. The terms would be communicated clearly to potential renters.
“When people come to apply, it will be clearly explained to them what the plan for home ownership is,” Tharrington said.
In response to a question by Councilman Michael Inscoe, Tharrington said that the city’s endorsement for his plan would not obligate the city financially in any way. It would not be any form of partnership or liability involving the city.
“I would just ask that you would support me in this application,” Tharrington said.
According to Tharrington, the tax credit, if awarded, would equal upward of $1 million, probably several million dollars. The program allows the credit to be sold through a broker to financing entities, such as banks. If purchased, the finance entity could apply the tax credit amount on a dollar-for-dollar basis toward future tax bills, typically over about a 10-year time frame.
The finance entity money to purchase the tax credit is what funds the development.
Tharrington said that he would not own the subdivision when built. Once the subdivision is completed, a management agency would receive the rental income, which would fund the maintenance, property taxes and other expenses of the subdivision.
“That funding would be very tight,” Tharrington said, referring to the rules under which the affordable housing programs operate.
He said that he would benefit from the sale of lots, and because he is also a contractor, he would hope to be able to build some of the homes as well.
If momentum continues on to the development of more than 80 additional lots at Carey Chapel Crossing, he would also benefit from those lot sales and housing start opportunities, as would other contractors, realtors and additional area businesses.
The tax credit is a national program for leveraging new affordable housing enterprises. It was created under the Tax Reform Act of 1986, giving incentives for driving private equity in the direction of developing affordable housing aimed at low-income Americans.
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