The state is tapping into a new federal program to offer $92 million in low-interest financing for affordable housing this year, money that should enable developers to build or renovate 1,000 rental units for lower-income Marylanders.
The financing, which Gov. Martin O'Malley plans to announce today at the Maryland Affordable Housing Coalition's annual meeting in Baltimore, is part of a nationwide effort to keep affordable-housing production from grinding to a halt when traditional sources of funding - from mortgages to tax credits - have shrunk drastically.
"This has been the most challenging past year for our industry, and everybody's been affected," said Kimberly A. Fry, executive director of the Maryland Affordable Housing Coalition.
State officials are working on a number of fronts to jump-start the hard-hit housing and construction sectors. As part of the federal program, Maryland officials said the state will loan $257 million to first-time homebuyers this year. They say that amount will finance 1,600 purchases.
O'Malley, who is up for re-election this year, separately plans to announce today that he will seek to extend the heritage tax credit, designed to encourage developers to fix up older buildings.
The affordable-housing program is a twist on what the state has done for years - issue bonds to provide mortgages to builders of affordable rentals. The market for these bonds "was pretty tough" last year, said Patricia Rynn Sylvester, director of multifamily housing at the state Department of Housing and Community Development. So, the U.S. Treasury Department is temporarily allowing states to issue mortgage-revenue bonds that it will purchase, fixing the interest rate for developers around 4.5 percent - lower than Maryland has ever been able to offer.
Lower interest rates aren't just good because they mean lower interest payments, said Andrew Vincent, director of Greater Baltimore AHC, a nonprofit housing developer. Low rates could allow builders to borrow more so they can do more.
"That's really the name of the game here, trying to find more resources in an environment where the resources for affordable housing are scarce," Vincent said.
In addition to mortgages, developers rely heavily on federal Low Income Housing Tax Credits to help cover the costs of constructing or fixing up affordable apartments. They sell these credits for cash to other businesses, which in turn use the credits to lower their taxes. But as the recession pinched profits, demand to buy the credits plummeted.
The Low Income Housing Tax Credit program typically raised $8 billion to $9 billion annually before the economy soured, said Raoul F. Moore, senior vice president of tax credit syndication at Enterprise Community Investment. Last year, he estimated, it raised half as much.
Moore is optimistic that the amount could rise to $6 billion this year as the economy improves. But a low-interest-rate lending program that lets developers stretch their dollars is welcome news, he said.
"Every little bit helps," said Moore, whose employer is part of affordable-housing giant Enterprise Community Partners in Columbia.
All told, the state hopes to help fund or finance about 2,200 units of affordable housing this year, the same number as last year. The Treasury financing program will account for almost half.