Where Credit Is Due

Indiana: Promoting innovative projects

In 2014, the Indiana Housing and Community Development Authority (IHCDA) created an “innovation round” as part of its LIHTC program.

Working with developers, the agency piloted a way to reward cutting-edge housing projects outside of the usual competitive allocation round. IHCDA set aside $1.5 million—about 10% of its annual LIHTC authority—for the program and invited developers to submit letters detailing their innovative housing proposals, including the development’s uniqueness, ability to serve an unmet need, how it contributes to IHCDA’s mission, and how it is at a competitive disadvantage in the normal LIHTC round. From there, five proposals were selected to continue on in the process and submit full applications.

“IHCDA talked about using the tax credit program for innovation,” says Jacob Sipe, IHCDA executive director. “Not only should we challenge the developers, but we as a state agency also have to challenge ourselves to be innovative.”

As a result, IHCDA got creative. The agency made sure the proposals met underwriting and program compliance requirements, but it threw out the scoring categories. It also formed an external advisory committee made up of non-IHCDA members to make funding recommendations to the agency’s board. The committee members included a director of a statewide disability advocacy network, an executive from an Indiana community development financial institution, and a representative from another state HFA.

The committee and IHCDA staff then conducted site visits, giving each finalist two hours to present their proposal. In the first year, three developments were awarded housing credits. The following year, in 2015, two more projects received LIHTCs.

One of the funded developments is Main Street Cottages in Princeton by Milestone Ventures, which wanted to explore cost-containment issues and proposed building a 20-unit project with modular construction. The advisory committee met the developer at the modular home factory for a presentation.

Another is South Bend Mutual Homes by South Bend Heritage and Neighborhood Development Associates. The developers proposed the first co-operative model in a LIHTC property in Indiana. Here, the residents help make decisions about property operations and have a lease–purchase option for their homes. The development team also committed to work with a local university to study the ongoing impact of the development on the residents and neighborhood.

IHCDA recently decided to recast the innovation round and created the Moving Forward program, which recognizes that affordability for families goes beyond housing. A partner in the program is Energy Systems Network (ESN), which assembled a team of industry experts. The industry experts are working with developers to create innovative housing concepts that focus on transportation and sustainability.

The idea is to find solutions that keep residents’ monthly housing and transportation expenses to no more than 45% of their income, says Sipe.

The agency selected two development teams, BWI and Pedcor Investments, out of 11 applicants to participate in the program. Their concepts will be developed during a series of workshops and meetings with IHCDA, ESN, and the assembled experts. Upon completion of the workshops and creation of development concepts, the two development teams will each be able to submit housing tax credit applications of up to $750,000 each this year.

Creating a new LIHTC program such as the innovation round requires the support of the developer community, stresses Sipe. “I’ve told this to developers,” he says. “This is their set-aside.”

By tossing out the scoring criteria for the initiative, IHCDA would be making decisions that are subjective but is committed to doing so in a highly ethical manner, according to Sipe. “If [the developers] have the confidence in our agency to do that, we will do it for them,” he says.