2025-057 Low Income Housing Tax Credit Financing July 11, 2025 Report No. 2025-057
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Non-Competitive 4% Low Income Housing Tax Credit Financing
BACKGROUND:
Housing Tax Credits
The Housing Tax Credit program is the largest public funding source in the nation for affordable
rental homes. Housing Tax Credits are funded federally and administered by states. In Texas, the
program is administered by the Texas Department of Housing and Community Affairs (TDHCA).
There are two types of Housing Tax Credits (HTC):
4% HTC • Non-Competitive
• Applications accepted year-round
• Allows the developer to reduce federal tax burden by a proportion of
eligible construction costs, 30% of the development costs.
• Requires resolution of no objection from municipality
• Must be at least 50% funded by Multifamily Housing Revenue Bonds
9% HTC • Competitive
• Application occurs once per year
• Allows the developer to reduce federal tax burden by a proportion of the
eligible construction costs, 70% of the development costs.
• Requires resolution of support from municipality
Multifamily Housing Revenue Bonds
Because a 4% Housing Tax Credit only covers approximately 30% of a development's equity,
developments must seek other sources of funding. Per Internal Revenue Code', 4% Housing Tax
Credit developments are required to finance at least 50%of the cost of land and construction using
Multifamily Housing Revenue Bonds. The State has a set amount of tax-exempt Private Activity
Bonds which can be issued in Texas each year, including Multifamily Housing Revenue Bonds.
The Texas Bond Review Board administers the Private Activity Bond program and issues
Certificates of Reservation to 4%Housing Tax Credit developments, stating that one of the state's
tax-exempt Private Activity Bonds may go to that development.
Afterwards, the development must find an approved government entity to issue the bond on a
conduit basis. Then the bond is purchased by a private investor to fund the cost of development.
These bonds do not create a debt or liability to the State of Texas or taxpayers of the jurisdiction.
1 Section 42(h)(4)(B)
July 11, 2025 Report No. 2025-057
Developers have options for conduit bond issuers, including Texas Department of Community
Affairs (TDHCA), but they may also partner with a conduit issuer local to the development.
Denton Housing Authority (DHA) is authorized to issue Multifamily Housing Revenue Bonds.
Under the Internal Revenue Code 2, bond issuers are required to receive approval from the elected
body that governs them. The City of Denton's City Council is the elected body that governs DHA.
DISCUSSION:
There are two potential development projects in Denton seeking a 4%Housing Tax Credits award
in 2025 and an accompanying Multifamily Housing Revenue Bond. Both project developers have
partnered with DHA as the conduit issuer, who will need the bond issuance approved by the City
of Denton. If approved, no debt obligation will be created for the City of Denton. If not
approved, the developers would have to seek Multifamily Housing Revenue Bonds elsewhere and
the projects may be at risk.
Roselawn Village
Roselawn Village Apartments is a 4% Housing Tax Credit Development proposed for 2800
Roselawn Dr. On February 18, 2025, City Council approved a Resolution of No Objection for the
developer's application to TDHCA for the tax credit(ID 25-103).
Waterford at Spencer Oaks
The Waterford at Spencer Oaks Apartments is an existing apartment complex at 2100 Spencer Rd,
Denton, TX 76205. Its' construction was funded by Housing Tax Credits in 1996. Their
affordability commitments last 30 years, and would otherwise expire next year in 2026, with the
apartments converting to market rate. By undergoing a rehabilitation with Housing Tax Credit
funding, the development would recommit to affordability for another 30 years. A Resolution of
No Objection to their application for the 4% Housing Tax Credit award will be brought to City
Council on the July 22 agenda for Public Hearing.
Bond Issuance
Both projects have selected DHA as the conduit issuer for their required Multifamily Housing
Revenue Bonds. DHA will hold the public hearings at 1225 Wilson St., Denton, Texas 76205 on
July 10 at 10 a.m. (Roselawn Village) and 11 a.m. (Waterford at Spencer Oaks). Approval for a
DHA bond issuance has not been considered by the City Council since Sep. 20, 2022. The City's
process has been to place this item on the consent agenda. Staff will place the approval of these
bonds for both developments on the Aug. 5 Consent Agenda. Staff will bring proposed
amendments to the HTC process later this year that include approving bond issuance for projects
concurrently with approving the Resolution of No Objection when possible.
2 Section 147(f), established by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
July 11, 2025 Report No. 2025-057
Timeline
• Feb. 18: Roselawn Village received a Resolution of No Objection
• July 10: DHA will hold public hearings regarding Multifamily Housing Revenue Bond
conduit issuance for both Roselawn Village and Waterford at Spencer Oaks
• July 22: City Council will consider a Resolution of No Objection for Waterford at Spencer
Oaks
• Aug. 5: City Council will consider approval of DHA's Multifamily Housing Revenue
Bond conduit issuance for both developments.
STAFF CONTACT:
Jesse Kent, Director of Community Services
REQUESTOR:
Staff initiated
STAFF TIME TO COMPLETE REPORT:
1 hour
PARTICIPATING DEPARTMENTS:
Community Services