In the fine print, there’s a solution
Very few builders are developers, and even fewer developers are builders. That’s a problem when it comes to affordable housing in single-family detached subdivisions.
Here’s the issue: When a developer is not a builder, he or she is still on the hook to provide 20 percent of the subdivision as affordable housing (if the subdivision has more than 10 lots).
Unlike multifamily apartments, which can buy their way out of providing affordable units by paying a fee-in-lieu to the city’s Affordable Housing Trust Fund, single-family subdivision developers have no such option.
There is a solution to their problem, although few have explored it, and that is to donate 20 percent of their lots to Santa Fe Habitat for Humanity.
The 20 percent affordability requirement is divided into two tiers of home pricing. Ten percent must be sold to those making less than 65 percent of area median income. The other 10 percent is for those making less than 80 percent of area median income.
In round numbers for a family of four, that means around $40,000 annual income in the lower tier. That means they get a home for around $130,000. The second-tier family can make up to $50,000 annually and get a home for around $160,000.
Given the cost of the land, infrastructure and building a house, that means the developer loses money on all the affordable homes, sometimes a lot of money.
Sometimes so much that the income from the 80 percent that can be sold at market rates is not enough to offset the loss on the affordable houses.
Even if the side of town makes the marketrate homes expensive enough justify the loss on the affordable, the consequence is a huge gap between the money losers and the moneymakers. That gap represents potential hardworking families who don’t qualify for the affordable houses and can’t afford the market-rate homes.
Where do they go? Can you say Rio Rancho? For developers who are not builders but must entice a builder to buy lots or build for the developer, donating lots to Habitat makes sense for a couple of reasons. First, the developer’s off the hook to convince a builder to lose money. But even better, the New Mexico Affordable
Housing Tax credit is available for the developer donating the lots. That is a very big deal.
The tax credit is worth 50 cents on the dollar, meaning if the fully developed lot appraises for $100,000, which unfortunately is not an outrageous number in Santa Fe today, the developer gets a $50,000 tax credit. In a 50-lot subdivision with 10 lots donated, that’s a $500,000 tax credit — serious money.
Unlike other tax credits the state offers on homes, the Affordable Housing Tax Credit can be used against gross receipts tax obligations. That is a very big deal.
During a development’s infrastructure phase, a lot of money gets spent and a lot of gross receipts tax gets paid. On the hypothetical 50-lot subdivision that can be north of $2 million dollars of cost and well over $150,000 in gross receipts taxes, there’s the potential for serious money and serious savings.
It has long mystified me that more nonbuilder developers don’t take advantage of the state’s generous tax credit. There is one project in negotiation with Habitat to make lot donations, but there should be more. With permission from Habitat for Humanity International, our local affiliate can now qualify families earning up to 80 percent of area median income.
With its commitment to zero interest mortgages (usury is forbidden by its mission) more people should be contacting Habitat, both homebuyers and developers.
Kim Shanahan is a longtime Santa Fe builder and former executive o∞cer of the Santa Fe Area Home Builders Association. He can be reached at shanafe@aol.com.