The “Millionaire Maker” Credit: A Different Take on the Low-Income Housing Credit by Mary K. Black-Whitby

What do you normally think of when you think of Low-Income Housing? The Ghetto? That part of town that’s falling apart? That’s what most people think of, but it shouldn’t be and here is why:

The Basics: Congress has made a credit to encourage investment in affordable housing for low-income tenants. For Utah, the Utah Housing Corporation certifies housing for low-income tenants and determines how much credit is allocated to the investors. For 2011, Utah was able to give a credit of up to $6,020,000 for low-income housing projects.

Investors are given a credit of up to 9% of the cost of developing the housing project for up to ten years. That means the investor gets back up to 70% (present value) of the total cost of the housing project! (The rate differs depending on financing and the type of building project contemplated.) Furthermore, there are federal financing options that can help the builder finance the project with below market interest rates.

Those individuals who qualify to live in low income housing must meet the income requirement, and the rent charged for low income housing is a percentage of the median income for the community. (These amounts differ depending on the region and family size)

Why do I call this the “Millionaire Credit” Then? It’s because after 10 years, the property goes back to the investor who can do with the property as he or she pleases! I envision an investor using this credit most efficiently by not building cheap apartments. Rather, an investor would build some of the nicest apartments or houses in town. Everyone would be clamoring to live there and as a result the investor would be able to pick and choose who the tenants would be. The rental agreement could be quite strict as to unreasonable damage to ensure that the investment real estate would stay pristine so that after ten years it could be sold or rented at a higher price.

Retirement Plan. Anyone tired of worrying about their retirement? What if you could ensure a steady stream of income? The Low-Income Housing Credit could be the answer. The best use of the credit would be for an investor to build an apartment complex, a house, or (on a larger scale) a block of houses every year for ten years. After ten years, the first building project would become available to sell with a net gain of up to 70% (the low-income housing amount), or the building could be rented at a higher amount with the result of a steady stream of income for life.

Why build the ghetto when you can have a practically interest free, government paid retirement plan? Go for the gusto and get the best bang for your buck!

Photo courtesy of Flickr by woodleywonderworks