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2007 South Carolina Low Income Housing Tax Credit Program

    Client Alerts
  • January 09, 2007

Responding to comments from the development community, the South Carolina State Housing Finance and Development Authority (Authority) has largely returned to a point-based allocation plan for its 2007 Low Income Housing Tax Credit Program (Program).

The Program provides for a credit against income tax liability in exchange for the construction or rehabilitation of affordable housing units.  As currently written the Program is based on competition among a number of developers, each of which is trying to produce the best housing product.  In order to compare proposals, the Authority has prepared its 2007 Qualified Allocation Plan (QAP).

Released on November 29, 2006, the 2007 QAP permits the Authority to exercise discretion in evaluating proposed development sites, while providing for a point-based scoring system for projects that are admitted to the second round (Tier Two) competition. 

During the initial (Tier One) review, the Authority will be looking for relatively flat sites with good drainage, that are within two miles by paved road from a number of identified services.  The use of the proposed site as affordable housing must be compatible with surrounding land use. 

Site Characteristics to Avoid
Specific characteristics that will prevent a site from receiving favorable consideration include:

Applicable to all proposed sites:

  • Site is a subdivision of an existing project
  • Site located in same market area as an existing Authority project with a vacancy rate above 10% (unless caused by non-market conditions)
  • Scattered sites in different market areas (as determined by the Authority)

Applicable to new construction sites only:

  • Within 500 feet of an easement containing an electric substation
  • Any portion of site contains an easement for an overhead electric power line, perimeter lines excepted (inapplicable if the utility provides a letter stating that the line will be buried)

The Plan also lists the following site characteristics that could result in a site being rejected:

  • Any portion of a building located within the fall distance of any pole, tower or support structure of a high voltage power line, communication tower, etc.
  • Site less than 500 feet from a junkyard, trash heap, dump pile, or other eyesore
  • Rehabilitation, acquisition and rehabilitation, or adaptive reuse sites containing an easement for an overhead electric power line, perimeter lines excepted
  • Sites where active railroads cause excessive noise and vibration
  • Sites where slope/terrain is not acceptable for development (as determined by the Authority)
  • Sites where existing wetlands, natural or man-made attributes could have a substantially negative affect on development
  • Sites within 500 feet of pipelines (low pressure natural gas distribution, water and sewer lines excepted)
  • Sites within one-half mile of a treatment, storage, or disposal facility for hazardous wastes, sewage treatment plants, active or inactive solid waste disposal facilities and /or solid waste transfer facilities
  • Sites within one-half mile of an operating industrial plant that may pose a safety risk, hazard, nuisance, etc.
  • Developments that threaten the economic viability of existing Authority-funded or RHS developments (as determined by the Authority)

QAP Process – Tier One
A market study to determine the viability of each proposed project will be carried out by market analysts assigned by the Authority at the applicants’ expense.

Application packages for the 2007 Program are posted on the Authority’s web site.   Fill-in applications on diskette will be available from the Authority beginning on January 19, 2007.  Tier One Applications must be submitted to the Authority no later than 5:00 p.m., February 28, 2007.

QAP Process – Tier Two
Projects meeting the Authority’s site and market criteria will be invited to submit Tier Two applications.  Tier Two applications will be evaluated on the basis of four major categories: “Optional Design Points; Development Criteria Points; Targeting Characteristics and Financial Characteristics.”  Points will be awarded within each category, as described in the QAP, which also contains a procedure to resolve tied scores.  Tier Two applications must be submitted to the Authority no later than 5:00 p.m., June 8, 2007.

In addition to the “Optional Design Points” awarded under the QAP, all projects must incorporate 14 “Mandatory Design Criteria,” as well as seven additional criteria required of all new construction projects, and two additional criteria if the project consists of single-family units.  Mandatory design criteria are summarized here.

As permitted by section 42 of the Internal Revenue Code of 1986, as amended, the Authority has reserved the right to allocate tax credits to projects in a manner that is inconsistent with the QAP if, but only if, it provides a written explanation to the public of its reasons for making such allocation.

As part of his approval of the 2007 QAP, Governor Mark Sanford has delegated to the Authority the ability to make such amendments to, or to waive any provisions of, the QAP or the Low Income Housing Tax Credit Manual, as it deems necessary.

This Client Alert is intended to inform readers of recent developments in the field of public finance law. It should not be considered as providing conclusive answers to specific legal problems.  For more information about the 2007 South Carolina Low Income Housing Tax Credit Program or for answers to your specific legal questions, contact Lewis Levy or Ray Jones in our Columbia office.