A Historic
Opportunity for
Health Sector
Investments in
Aordable Housing
LEVERAGING THE 4% LOW-INCOME TAX CREDIT PROGRAM TO
BUILD AND PRESERVE AFFORDABLE HOMES IN PHILADELPHIA
November 2023
LOCATION: INN OF AMAZING MERCY CREDIT: HALKIN MASON PHOTOGRAPHY
WRITTEN AND EDITTED BY:
Ross Clarke, Corporation for Supportive Housing
Brian McShane, Corporation for Supportive Housing
Garre O’Dwyer, PACDC
Rick Sauer, PACDC
This report was produced by PACDC and made possible by
generous support from the Pennsylvania Housing Finance
Agency and LISC Philadelphia
Introduction
The Philadelphia Association of Community Development Corporations (PACDC) partnered with the
Corporation for Supportive Housing (CSH) and Local Initiatives Support Corporation (LISC) Philadelphia
to develop a model through which health sector investment may enhance the viability of 4% Low Income
Housing Tax Credit (LIHTC) preservation and new construction projects in Philadelphia, Pennsylvania.
While there is a highly competitive market for 9% tax credits, 4% credits have not always been fully utilized,
despite being a state with a dire need for more aordable housing. The reason for this is that the 9%
tax credit historically generate around 70% of a development’s equity while a 4% tax credit will generate
around 30% of a development’s equity. Additionally, 4% tax credits are primarily for those projects seeking
nancing through tax-exempt private activity bonds. 4% projects require considerably higher amounts of
subsidy per unit than 9% projects. There is a need to identify additional gap nancing, lower development
costs, and facilitate new partnerships that can make 4% LIHTC projects more viable for aordable housing
developers.
Concurrently, there has been a growing understanding of the need to invest in social determinants of
health, such as housing. CSH has worked in a number of communities that have seen health systems invest
in supportive housing to address this social determinant, improve health outcomes, and strengthen the
communities in which they are anchor institutions. Supportive housing is a proven intervention that can
improve health outcomes and reduce individuals’ interactions with hospital/health systems’ Emergency
Departments.
1
Moreover, helping to create and preserve aordable housing is a key way for health
systems to meet mission driven values such as stabilizing communities in their footprint and improving the
lives of the individuals and families who live there.
There is an urgent need for more safe, aordable homes in Philadelphia as rental prices have far
outstripped wages, the poorest of America’s large cities. We are also facing a looming threat of
losing many of the existing subsidized units that we have currently. After the expiration of the LIHTC
aordability period, an owner is free to transition the development to market-rate, or to sell the land for
other development. This is particularly worrisome in communities that have appreciated substantially in
value. There are 12,000 units of aordable housing that are at risk of being lost in this way over the next
decade.
2
As anchors of their communities, institutions like hospitals and universities must be at the table
for helping their neighbors navigate past them.
A Historic Opportunity for Health Sector Investments in Aordable
1
1
hps://hospital.uillinois.edu/about-ui-health/community-commitment/beer-health-through-housing
2
hps://phlcouncil.com/city-council-enacts-peoples-preservation-package-bolstering-aordable-housing-preservation-as-12000-aordable-homes-face-threat-of-expiration-over-the-
next-decade/
The ultimate goal of this project is to make recommendations that will help
develop a model for health sector investment in 4% LIHTC developments,
which will inform actionable ways to address housing as a social determinant
of health. These investments may take the form of capital, land, loans, or
guarantees. Specifically, we seek to build off of the historic opportunity
presented by the Pennsylvania Housing Finance Agency’s (PHFA) creation
of a Health for Housing Investment program which will provide up to a $1.5
million match per project to support healthcare sector investment in 4%
developments.
In order to determine what may be a successful model for this type of investment in Philadelphia, PACDC
partnered with CSH to engage a wide array of stakeholders including community developers, aordable
housing advocates, members of city government, and local health systems to garner insight into the
utilization of 4% LIHTC credits in Philadelphia (see Acknowledgements for a list of participants). A wide
range of stakeholders gave insight into the ways that 4% projects have been executed, some of the
ongoing challenges that exist in lling nancing gaps for those projects, as well as eorts that have been
made to address this long-standing issue.
Introduction
2
A Historic Opportunity for Health Sector Investments in Aordable
LOCATION: PORRATA-DORIA PLACE CREDIT: HACE
Challenges
There are a number of challenges that make 4% LIHTC projects more diicult to execute in Philadelphia
than their 9% credit counterparts. In order to understand the ways in which health system investment can
leverage 4% LIHTC development and preservation resources, one must acknowledge and adapt to the
following challenges:
3
High development costs/Relatively low rents
Due to prevailing wage rates in Philadelphia, construction costs
are high and often compared to very expensive markets like
New York City. Labor unions were previously engaged to try to
negotiate an aordable housing rate, but there have not been talks
for several years since these negotiations were not successfully
resolved. Typically, 4% LIHTC projects have higher soft costs,
including nancing and legal fees. Concurrently, market rate rents
in Philadelphia remain signicantly lower than those in communities
with similar high development costs. Construction costs, which were
already relatively high, have increased signicantly since the onset
of the COVID-19 pandemic disrupted supply chains for materials
like lumber requiring the use of recovery funds to ll gaps in project
nancing.
3
As such, 4% LIHTC nancing is currently more viable
for preservation projects due to the high cost of new construction;
however, this is provided that the rehabilitation scope is not too
extensive. Preservation projects with extensive costs can often require
considerable amounts of subsidy, which can present challenges for
utilizing 4% LIHTC nancing.
Challenges
High Development
Costs/ Relatively
Low Rents
Scarce Rent
Support/ Subsidies
Low Wages/High
Poverty
Need For More Soft
Funding Sources
Pennsylvania
Housing Finance
Agency Per Basis
Cap
3
hps://www.uschamber.com/series/above-the-fold/new-study-nds-commercial-construction-facing-shortages-due-covid
A Historic Opportunity for Health Sector Investments in Aordable
Challenges
4
Low wages / high poverty
Despite Philadelphia’s comparatively low housing costs, many city residents simply do not have enough
income to nd housing they can aord. A recent study
4
looked at housing aordability in the city and found
that while many other major urban centers in the nation struggle with high cost of housing prices, like
New York City, for Philadelphia the low wages of residents is a bigger factor. In comparing the city to the
country’s 10 most populous cities, Philadelphia has the highest proportion of cost-burdened households
with low incomes. Simply put, low wages mean individuals and families do not make enough to aord much
of the housing that is available.
Scarce operating support / subsidies
The availability of operating subsidies, which help cover rent for tenants, is limited in Philadelphia. Annual
Contributions Contracts (ACC), funded by US Department of Housing & Urban Development (HUD)
and administered by Philadelphia Housing Authority (PHA), have been the most widely available rental
subsidies; however, ACCs pay a maximum of $500 per month in addition to tenants’ portion of rents.
Often, their funding stream is not enough to make projects viable or sustainable due to the extremely low
incomes of many tenants. Recognizing the low collectible rents and a lack of adequate operating subsidy,
many projects are unable to support private debt as part of their nancing. In recent years, PHA has
issued RFPs to provide a limited number of projects with Project-Based Section 8 or Rental Assistance
Demonstration (RAD) project-based operating subsidy to serve additional very low income households.
PHFA per unit basis cap
The Pennsylvania Housing Finance Agency (PHFA) applies a $335,000 per unit basis cap on 4% deals,
which restricts developers from leveraging the full amount of eligible basis for their projects. This means
that $335,000 per unit is the maximum amount allowed on all depreciable costs normally included in the
eligible basis determination, though in Philadelphia per unit construction costs can drastically exceed this
amount. This can leave considerable amounts of equity on the table for many projects given the high cost
of construction in Philadelphia.
Soft funding sources
Many Philadelphia aordable housing projects include subsidy from the City of Philadelphia, which is
generally limited to $3 million per project—an increase from $2 million previously. To address the large
gaps often seen in 4% LIHTC project budgets, developers typically need to piece a number of state, local,
and private sources together to make budgets work. This presents its own challenge as these funding
sources often have their own requirements and restrictions that can be confusing and even contradictory.
(Please refer to the chart on the next page for commonly used sources.)
4
hps://www.pewtrusts.org/en/research-and-analysis/reports/2020/09/the-state-of-housing-aordability-in-philadelphia
A Historic Opportunity for Health Sector Investments in Aordable
Past Eorts to Support
4% LIHTC Projects
Recognizing that 4% LIHTC equity had in the past been left on the table, stakeholders in Philadelphia
have aempted several times to address the challenges in increasing the utilization of 4% LIHTCs.
The recommendations from these eorts are still applicable and should be considered as part of
comprehensive eorts to streamline 4% LIHTCs for production and preservation.
Most notably, Philadelphia’s City Council convened a multi-sector commiee several years ago, to review
the nancial viability of 4% LIHTC projects. Their recommendations included:
5
1. Standardizing legal documents and partnership agreements as ways to lower transaction
costs.
2. Developing a program requiring investors to give their best price in hopes of geing a
succession of projects.
3. Exploring guaranties on subsidies from both the City and from foundations.
• This recommendation was developed recognizing operating subsidies are generally project-
based, but investors may require transformation reserves to be capitalized in case operating
subsidies are lost.
In addition to this eort, Philadelphia LISC is the convener of the Preservation Network, a multi-sector
collective of private, non-prot, and public entities that work together to ensure Philadelphia’s publicly
assisted housing is protected. The Preservation Network addresses four key preservations strategies:
1. Open Data to assess, target, prioritize, and develop preservation plans for at-risk properties;
2. Building local capacity of owners, residents, asset managers, housing advocates and public
oicials through customized support and assistance to beer tackle preservation challenges;
3. Developing supportive regulations to preserve at-risk properties; and
4. Identifying and developing new nancing and revenue streams to support preservation and
address funding challenges.
A Historic Opportunity for Health Sector Investments in Aordable
Where 4% Deals Currently
Stand in Philadelphia
City Council action
In Spring 2021, City Council authorized a $400 million Neighborhood Preservation Initiative bond issue
that includes a focus on investments in aordable housing, commercial corridors and small businesses, and
neighborhood infrastructure.
5
A portion of these funds can be used to support 4% LIHTC deals, as long-
term, low interest subordinate debt to ll nancing gaps for low-income housing projects.
In addition, a ballot question was approved by Philadelphia voters in November 2021 for a charter change
that mandates a .5% allocation of the city’s General Fund appropriations to the Philadelphia Housing Trust
Fund starting in FY23. When combined with Deed and Mortgage Recording Fee revenues, this has resulted
in annual Trust Fund revenue of approximately $44 million. Additionally, the Philadelphia Land Bank can be
an important source of land for 4% LIHTC production deals.
4% rate x
Before the passage of the Coronavirus Aid Relief and Economic Security (CARES) Act, the value of 4%
LIHTCs had fallen to record lows nationwide. In 2020, the value of 4% tax credits hovered between 3.07%
and 3.09%. A key provision of the legislation set a permanent minimum 4% Housing Credit rate, eective
for buildings placed in service after December 31, 2020. Although equity pricing dropped slightly when
more credits became available immediately following the 4% rate x, in the long term, the 4% rate x is a
very positive development that will help to reduce the size of nancing gaps.
PHFA per unit basis cap increase
In 2021, PHFA raised the per unit basis cap from $300,000 to $335,000 for 4% LIHTC projects. While this
increase allows for additional equity to be raised, it may still not be enough of a change in the basis cap to
ensure greater utilization of 4% credits by maximizing equity that the credits can produce.
Philadelphia RFP for Aordable Rental Production and Preservation Housing Projects
The Philadelphia Division of Housing and Community Development (DHCD) solicits proposals to nance
the development and preservation of aordable rental units designed to serve low- and moderate-income
households using funding from the Philadelphia Housing Trust Fund (HTF), the Neighborhood Preservation
Initiative (NPI), federal HOME program, federal HOME-ARP, and Community Development Block
6
5
For more information on the City Council legislation, please see: hps://www.gtlaw.com/en/insights/2020/12/philadelphia-city-council-approves-changes-tax-abatement-programs-
residential-construction-tax
A Historic Opportunity for Health Sector Investments in Aordable
Grant (CDBG) funds. This Request for Proposals (RFP) is designed to assist in providing gap nancing
for rental production and preservation projects that will seek 4% LIHTC from the Pennsylvania Housing
Finance Agency (PHFA) as well as other preservation deals. This RFP provides needed gap resources for
production and preservation projects seeking 4% LIHTCs. There is an additional $500,000 available in
gap nancing made available from the Commerce Department for the commercial portion of a mixed
used project.
The Philadelphia Housing Authority (PHA) has issued parallel RFPs for operating support for projects, as
well as capital funds that can be converted to RAD project based operating subsidy. RAD allows Public
Housing Authorities like PHA to convert units from their original sources of HUD nancing to project-based
Section 8 contracts. This removes the restriction from securing private sources of capital funding. This
typically allows owners to address maintenance and repairs that may have been deferred due to costs.
Examples of Gap Financing Sources
To nance 4% LIHTC projects in Philadelphia, developers have leveraged a variety of gap nancing
sources. A more detailed overview of these sources is provided in Appendix B. While this list is not
exhaustive, sources include:
Where 4% Deals Currently Stand in Philadelphia
7
Gap Financing Options
City Funds (Housing Trust Fund and the Neighborhood Preservation Initiative)
CDBG/HOME
PHARE
FHLB Aordable Housing Program
Private Fundraising/Donations/Developer Equity
Reinvestment Of Developer Fee
Private Debt (if feasible)
A Historic Opportunity for Health Sector Investments in Aordable
Strong interest in engaging health systems
There is interest in engaging health care systems to increase their participation to address 4% LIHTC
projects’ nancing gaps through the provision of equity, utilization of land/property owned by a health
system, gap subsidies, or other investments that may enhance 4% LIHTC projects’ viability. All stakeholders
interviewed as part of this project expressed a strong interest in replicating health system investment
initiatives implemented in other localities like New Jersey. Developers interviewed for this paper were
primarily already serving high utilizers of health systems. At the same time, sector partners in and around
Philadelphia have expressed interest in housing, but there is currently no replicable nancing model
available.
Pennsylvania’s neighbor, New Jersey, has a successful model named the New Jersey Hospital Partnership
Subsidy Program that all interviewees see promise in adapting as an approach to ll the gap in 4% LIHTC
project nancing in Philadelphia. In the fall of 2018, the New Jersey Housing & Mortgage Finance Agency’s
(NJHMFA) Hospital Partnership Subsidy Program was launched. Projects utilize 4% LIHTCs and tax-exempt
bond nancing, and NJHMFA provides capital subsidy which is matched dollar-for-dollar with funds from
participating hospitals to provide aordable apartments for low- and moderate-income families. The
program also provides operating rental subsidy for required supportive housing set asides and strongly
encouraged that the projects include apartments set aside for special needs residents and/or individuals
who are frequent users of hospital emergency department services.
The rst hospital to implement this is St. Joseph’s Hospital in Paterson, NJ, which contributed $4.5 million
as a nancial investment. Other hospitals participating in this program have similarly invested land, real
estate, and other assets spurring the creation of an expected 180 to 240 of aordable and supportive
housing units. It was announced that University Hospital in Newark, NJ will invest $3 million to develop
78 aordable rental apartments including 16 units that will be allocated as supportive housing units. The
hospital’s investment is supplemented by $1.6 million from the NJHMFA Special Housing Needs Trust Fund,
$3 million from the Hospital Partnership Subsidy Program, and $300,000 in HOME funds from the City of
Newark.
Where 4% Deals Currently Stand in Philadelphia
8
A Historic Opportunity for Health Sector Investments in Aordable
9
Conclusion & Recommendations
Given the momentum provided by the developments noted above and the strong interest from a variety
of stakeholders in leveraging investment in housing from hospitals/health systems, we are making the
following recommendations detailed below. Ultimately, the solution to further strengthening 4% LIHTC
deals in Philadelphia will require some combination of eorts that involves contributions and policy shifts
from PHFA, the City of Philadelphia, and health systems.
Hospital and health system investment in supportive housing projects
As anchor institutions, hospitals and health systems can play a signicant role in stimulating aordable and
supportive housing developments in their communities. As seen in many communities across the nation,
there is increasing investment from health systems in housing as a social determinant of health. This level
of participation has shown to improve the health outcomes of patients as well as to lower costs associated
with emergency and crisis care. Health systems should partner with non-prot developers, service
providers, and government partners to determine the best role for them in these development projects.
This may include:
1. Investment to ll nancing gaps in 4% LIHTC development and preservation projects
2. Donation of land or real estate
3. Contribution to partnership endeavors where funds are pooled to support development in
combination with education, employment, and other social determinants. Example of such an
initiative is Central City Concern’s Housing is Healthcare
5
initiative
4. Contributions to pay for success initiatives or exible subsidy housing pool
A Pennsylvania health system subsidy program
In 2023, PHFA announced the creation of a Health for Housing Investment program to incentivize
healthcare sector investments in aordable housing. This will provide a match of up to $1.5 million in
hospital investment in capital, loans, or land. This program should be made a permanent and PHFA should
regularly check in with healthcare partners to periodically adapt the program to improve the likelihood
of program utilization. Additionally, CSH recommends that a supportive housing carve-out be part of
considerations for health system investment in aordable housing to address the needs of vulnerable
individuals who frequently utilize crisis and emergency care.
5
hps://www.wsj.com/articles/this-new-york-union-is-swallowing-35-pay-cuts-for-more-work-11605790800
hps://rew-online.com/lm-signs-historic-hiring-deal-with-laborers-union/
A Historic Opportunity for Health Sector Investments in Aordable
Increase and phase out the Per Unit Basis Cap for 4% LIHTC projects
While the recent increase in the per unit basis cap is helpful, there are many other markets and states
that do not have a cap or have phased out their cap. Developers, consultants, and other stakeholders
interviewed identied the elimination of the cap as a potential incentive for greater utilization of
4% credits.
Increase funding for PHARE
The PHARE program is currently capped at being able to access up to $60 million of increased reality
transfer taxes. Raising or eliminating this cap would allow PHARE to generate tens of millions of more
dollars to address a range of unmet housing needs. In addition, PHARE should re-visit the 4% LIHTC unit
minimum of 50 units for funding so that smaller developments can be supported.
Exploration of further utilization of Neighborhood Assistance Program to leverage health system
investment
The Neighborhood Assistance Program (NAP), administered by Pennsylvania’s Department of Community
and Economic Development that oers tax credits to businesses to invest in projects to improve distressed
areas. Health systems may be in unique positions to qualify for the program which could provide additional
nancial resources for 4% LIHTC projects.
Adopt Philadelphia City Council working group recommendations
As referenced above, Philadelphia’s City Council convened a multi-sector commiee to create
recommendations to strengthen 4% LIHTC deals. There are recommendations made by this group that
should still be implemented, including:
1. Standardizing legal documents and partnership agreements as ways to lower transaction costs.
2. Developing a program requiring investors to give their best price in hopes of geing a succession
of projects.
3. Exploring guaranties on subsidies from both the City and from foundations may allow for
transformation reserves to be released to sponsors.
●
This recommendation was developed recognizing operating subsidies are generally project-
based, but investors may require transformation reserves to be capitalized in case operating
subsidies are lost.
Conclusion & Recommendations
10
A Historic Opportunity for Health Sector Investments in Aordable
Continue to explore ways to make 4% LIHTC projects more cost-eective
There are other recommendations that were made previously that warrant further exploration to
determine viability and the impact that they may have on making 4% LIHTC projects more cost-eective,
including:
●
Exploring construction methods such as modular construction to lower costs, and engaging with
partners in other markets who may have data on outcomes of recent modular projects.
●
Engaging with labor unions to reopen negotiations about an aordable housing rate.
●
In New York City, L+M Development Partners and Laborers’ Local 79 struck a deal to employ
union members on construction and rehabilitation of aordable housing projects at a 35%
decrease to wages. The deal allowed the union to employ members who were otherwise not
able to schedule regular and consistent work. This deal does not represent a policy change that
can be applied across the City, as it represents one deal between a large for-prot developer
and one trade union. However, the deal may serve as a model for similar negotiation locally.
●
Exploring ways to enhance and expand availability of operating subsidy. Potential examples could
include:
●
Pairing ACCs/RAD with an additional shallow rent subsidy to increase project revenue.
●
Assessing the current use of operating support for specic populations to determine whether they
are underutilized (e.g., 811 Program, Family Unication Program), and developing strategies to
increase their utilization.
Building on recent eorts by the Philadelphia Housing Authority
As referenced above, The Philadelphia Housing Authority (PHA) has taken action in recent years by issuing
RFPs and awarding Project-Based Section 8 to a limited number of projects in addition to ACCs and
capital subsidy. ACC operating support as well as capital funds that can be converted to RAD project-
based operating subsidy represent an opportunity to capitalize on recent federal investments in aordable
housing. Considerations should be made to leverage funding like the approximately $42 million in HOME
ARP funds and the $1.4 billion in State and Local Fiscal Recovery Funds to enhance local opportunities like
those already advanced by PHA.
Conclusion & Recommendations
11
A Historic Opportunity for Health Sector Investments in Aordable
12
Appendix A
LISC Philadelphia, the Corporation for Supportive Housing and the Philadelphia Association of Community
Development Corporations would like to extend gratitude to the partners listed (alphabetically by last
name) below who participated in conversations that helped shape these recommendations.
Katherine Brennan
Formerly with the New Jersey Housing & Mortgage Finance Agency
Mark Deitcher & Sue McPhedran
Mission First Housing Group
Andrew Frishkoff & Carolyn Placke
LISC Philadelphia
Maria Gonzalez
HACE
Rose Gray
Asociación Puertorriqueños en Marcha
Greg Heller & Darci Bauer
Formerly with Philadelphia Housing Development Corporation
Ben Laudermilch
Formerly with Inglis Housing Corporation
Mark Levin
Formerly with Regional Housing Legal Services
Nora Lichtash & Paul Aylesworth
Women’s Community Revitalization Project
Chris Paul
Diamond & Associates
Angela Steele & Maria Buckley
Stone Sherick Consulting Group
Janet Stearns & Matthew McCarter
Project HOME
Robin Weissman, Bryce Maretzki, Carl
Dudeck, Jessica Perry, Clay Lambert, &
Jeannie Galloway
Pennsylvania Housing Finance Agency
Herb Wetzel
City Council President’s Oice
A Historic Opportunity for Health Sector Investments in Aordable
Appendix B
Gap Financing Sources Denitions
13
Philadelphia Housing Trust Fund
The Philadelphia Housing Trust Fund was created in September 2005 as a dedicated and ongoing local funding source. The Fund
provides resources for the development of new aordable homes, the preservation and repair of existing occupied homes, and
the prevention of homelessness. Through these investments the Fund promotes neighborhood stabilization and revitalization.
Originally the Trust Fund derived funding from deed and mortgage recording fees to serve a range of income levels. Half of the
funds targeted to extremely low-income families and individuals earning below 30% area median income (AMI) and half targeted
to low- to moderate-income households earning between 30% and 115% of area median income. The fund also addresses a
variety of housing needs with half of its funds producing new or substantially rehabilitated homes and half supporting housing
preservation, home repair and homelessness prevention. In recent years, new revenues were allocated to the fund that did not
adhere to the same income limitations or regulations. As a result, these newer funds did not target individuals and families at the
same lower levels of AMI. A ballot initiative was approved by voters in November 2021 ballot will divert .5% of the City’s General
Fund Appropriations beginning in FY 23 to the original funding mechanism re-instituting the income limits that will target a
substantial amount of activity to those with lower incomes.
Gap Financing Options
City Funds (Housing Trust Fund and the Neighborhood Preservation Initiative)
CDBG/HOME
PHARE
FHLB Aordable Housing Program
Private Fundraising/Donations/Developer Equity
Reinvestment Of Developer Fee
Private Debt (if feasible)
A Historic Opportunity for Health Sector Investments in Aordable
Neighborhood Preservation Initiative (NPI)
In May of 2021 Philadelphia City Council approved a $400 million bond issue to address a range of unmet housing needs. Funds
will be distributed at $100 million per year over four years.
Community Development Block Grant (CDBG)
The federal CDBG Program provides annual grants on a formula basis to states, cities, and counties to develop viable urban
communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally
for low- and moderate-income persons.
HOME Funds
The federal HOME Investment Partnerships Program (HOME) provides formula grants to states and localities that communities
use - often in partnership with local nonprot groups - to fund a wide range of activities including building, buying, and/or
rehabilitating aordable housing for rent or homeownership or providing direct rental assistance to low-income people. HOME is
the largest federal block grant to state and local governments designed exclusively to create aordable housing for low-income
households. HOME funds are awarded annually as formula grants to participating jurisdictions (PJs). The program’s exibility
allows states and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit
enhancements, or rental assistance or security deposits.
PHARE (State Housing Trust Fund)
The Pennsylvania Housing Aordability and Rehabilitation Enhancement (PHARE) Fund was established by Act 105 of 2010 (the
“PHARE Act”) to provide the mechanism by which certain allocated state or federal funds, as well as funds from other outside
sources, would be used to assist with the creation, rehabilitation and support of aordable housing throughout the Commonwealth
of Pennsylvania.
FHLB Aordable Housing Program
By law, each Federal Home Loan Bank must establish an Aordable Housing Program (AHP), and must contribute 10 percent of
its earnings to its AHP. Under the Federal Home Loan Bank Act (FHLBank Act), the specied uses of AHP funds are to nance the
purchase, construction, or rehabilitation of owner-occupied housing for low- or moderate-income households (with incomes at
80 percent or less of the area median income), and the purchase, construction, or rehabilitation of rental housing where at least
20 percent of the units are aordable for and occupied by very low-income households (with incomes at 50 percent or less of
the area median income). The AHP leverages other types of nancing, and supports aordable housing for special needs and
homeless families, among other groups.
Private Debt (if feasible)
For projects with suicient net operating income, private debt can be leveraged, which can reduce the need for public subsidy
and other gap ller sources. In many cases in the Philadelphia market, suicient rental income cannot be achieved to allow for the
leveraging of private debt, so in these cases additional operating subsidy or other gap ller sources are necessary.
Pennsylvania Low Income Housing Tax Credit
In 2020, the Pennsylvania Low Income Housing Tax Credit program was created, which will be mirrored after the federal LIHTC
program. The program was funded with an initial $10 million in 2021. This additional nancing program for aordable housing is a
welcome resource.
Appendix B
14
A Historic Opportunity for Health Sector Investments in Aordable
The Philadelphia Association of
Community Development Corporations
1315 Walnut Street, Suite 920
Philadelphia, PA 19107
215-732-5829
www.pacdc.org
follow us @phillycdcs
