HIGHLIGHTS

• 37% of applications for affordable housing project financing were approved for state and federal tax credits in 2020.

• The dollar value of tax credits allocated to St. Louis developers in 2020 met 42% of local annual demand for affordable housing financing.

• There were $33.8M of subsidies for construction or major rehabilitation of affordable housing projects located in St. Louis City and County in 2020.

• $4.9 billion dollars in home mortgage capital was deployed in the St. Louis region in 2020.

• Black applicants are three times as likely to be denied a home mortgage loan than white applicants, most frequently on the basis of their credit history. 

Overview

Building new affordable housing opportunities requires financing for land acquisition, demolition, construction, and rehabilitation of formerly blighted properties or properties with non-residential past. This section will discuss the resources available to nonprofit and for-profit developers, as well as to prospective homeowners that seek mortgage financing for home purchases. These resources include:

• Subsidies for affordable housing developers: LIHTC, HOME, CDBG, and AHTF

• Grants for vacant property stabilization for Land Reutilization Authority: Prop NS

• Home purchase loans for homebuyers

• Homebuyer assistance programs 

Subsidies

It is nearly impossible for affordable housing to be built for low- and very low-income households without subsidies. Financing affordable housing development requires developers to successfully apply to many separate, uncoordinated tax credit and grant programs, in addition to getting loans from financial institutions. In 2020, there were $33.8M of subsidies allocated to projects located in St. Louis City and County. 

LIHTC

The most significant source of funding for affordable housing is the Low Income Housing Tax Credit program (LIHTC), which is a federal tax credit administered by the Missouri Housing Development Commission. Developers then sell the tax credits to investors to raise money for the development. There are typically many more applications than available tax credits. In 2020, there were 35 St. Louis-area projects that applied for federal and state tax credits, of which only 13 received support. Successful applications secured $11.0M in federal tax credits and $5.3M in state tax credits. Notably, the Housing Authority of Saint Louis County applied for LIHTC to finance new construction at its existing property Arbor Hill Apartments, but they were not successful in this round. 

HOME

HOME funds are federal grants or loans that can be used by developers for housing rehabilitation and new construction of housing. HOME funding can also be used for “necessary and reasonable” activities related to the development of affordable housing, including site acquisition, site improvements, demolition, and relocation. In 2020, the City of St. Louis Community Development Administration (CDA) allocated $5.7M in HOME funds across 28 projects. On average, that equates to $440,692 per project.  Since 2015, $10.7 million dollars of HOME funds have been awarded to 28 projects which produced 620 units of housing. As of August 2021, our data request to the Saint Louis County Office of Community Development is still pending and will be updated in this report in an addendum.

CDBG

The Community Development Block Grant program (CDBG) are grants to local governments to fund community development activities, including improving housing quality, providing affordable housing, and creating economic opportunities for low- and moderate-income people. In 2020, the City of St. Louis CDA allocated $3.1M in CDBG dollars across 33 projects related to new construction or rehabilitation. On average, that equates to $441,000 per project. Since 2015, $11.9 million in CDBG funds were awarded to 33 projects which produced 406 units of housing. As of August 2021, our data request to the Saint Louis County Office of Community Development is still pending and will be updated in this report in an addendum.

AHTF

The City’s Affordable Housing Trust Fund supports several new construction or rehabilitation projects as well as transitional housing programs. In 2020, the City’s Affordable Housing Commission allocated $1.9M in AHTF dollars to 6 projects related to construction or major rehabilitation. On average, that equates to $488,788 per project. Since 2015, $8.1M in AHTF funds were awarded to 24 projects which produced 667 units of housing. The County’s AHTF program has not yet distributed funds. 

AHAP

The Affordable Housing Assistance Program (AHAP) housing production state tax credit allows Missouri businesses and/or individuals to support affordable housing production. Eligible donors can contribute cash, equity, services, or real or personal property to a non-profit community-based organization for the purpose of providing affordable housing assistance activities or market-rate housing in distressed communities. The AHAP tax credit can be used one-time by each donor and it credits 55 percent of the total value of an eligible donation. Annually, MHDC offers $10M in production tax credits and $1M in operating assistance tax credits, which allows donors to support the operational expenses of a non-profit community-based organization. In 2020, four St. Louis organizations received $6.7M in donations through the AHAP program. 

Prop NS

The purpose of the Prop NS Program is to stabilize vacant residential buildings in the City of St. Louis owned by the Land Reutilization Authority (LRA) to support the subsequent purchase and full rehab by others. As of July 2021, this program has 28 properties in the process of being stabilized, seven properties are for sale, five are pending sale, and two have sold. As much as $30,000 in stabilization funding is available for single-family homes and up to $50,000 is deployable for multifamily units.

Home Purchase Loans

The Home Mortgage Disclosure Act (HMDA) requires financial institutions to maintain, report, and publicly disclose loan-level information about mortgages, including applications for home purchases. As a caveat, home purchase loan applications are an underestimate of demand and interest for home mortgage capital: homebuyers who have received loan denials from previous applications may be discouraged from applying again, and some homebuyers may be advised their financial situation would lead to a loan denial, leading them to not submit an application.

According to the Home Mortgage Disclosure Act data, there were 32,285 applications for home purchase loans in St. Louis City and County in 2020. A total of $4.9 billion dollars in home mortgage capital was deployed in our region last year. Applications and approvals for home purchase loans were nearly absent in parts of North County and North City. Hotspots for mortgage activity were located in the near suburbs of St. Louis City and in pockets of South City. 78% of mortgages were issued for properties located in Saint Louis County. 

Black applicants were three times as likely to be denied a home mortgage loan than white applicants. Despite this disparity, home mortgages are the loan type in which black applicants are most likely to receive a loan. Black applicants are less likely to receive loans for home improvement or home refinancing.

Loan denials typically occur due to the following reasons: debt-to-income ratio, credit history, insufficient collateral, or incomplete credit applications. In St. Louis, black applicants are 50% more likely than the applicant pool as a whole to be denied a loan on the basis of their credit history. 

Homebuyer Assistance Programs

Homebuyer assistance programs typically provide credit counseling, down payment assistance, and affordable interest rates on mortgages. The Missouri Housing Development Commission offers the First Place Homebuyer Program and the Next Step Homebuyer Program. The Housing Authority of Saint Louis County offers a Homeownership program that allows voucher holders to apply their vouchers to cover mortgage payments.  Neither currently publishes data for these programs disaggregated by geography, income, or race.

Data Recommendations

In order to better track the impact and need for financing for new construction and homeownership, we recommend…

1. MHDC publishes data about its homebuyer assistance programs disaggregated by geography, race, and household income. 

2. Gateway Neighborhood Fund should plan to publish data disaggregated by geography, race, and household income.

3. SLDC maintains a public database of affordable housing development projects across subsidy programs.