Double Qualified Deal (LIHTC & Opportunity Zone)

[Jordan Robinson]

Fellow BP Investors/ Developers,

I want to share a concept I’ve been thinking about for a development project with the hopes of open sourcing it and getting some feedback.

I’m calling it a Double Qualified Deal, its basically an Affordable Housing Concept that could be done in any market in the U.S.

And It’s easiest for me to express it as a formula: 

LIHTC + (QCT*QOZ) + QOF

where…

LIHTC: An Affordable Housing Project Financed with Low Income Housing Tax Credits

QCT: The Property is Located Within a Qualified Census Tract

QOZ: The Property is located within a Qualified Opportunity Zone

QOF: The Ownership entity is registered as a Qualified Opportunity Fund

The basic idea is to combine the opportunity zone tax benefits with the 30% boost in eligible basis that LIHTC deals get in qualified Census tracts.

Investors would get opportunity fund benefits on the capital gains that they invest as well as a 10 year tax credit AND equity in the project with no capital gain on the appreciation after 10 years.

And the Developer would be able to use the LIHTC eligible basis boost to raise 40-50% of the equity for the project and obviously earn a development fee.

I recognize this structure would only appeal to a small group of investors with capital gains and that are comfortable with a long term holding period. (I imagine this deal to work best for family offices or high net worth individuals after a capital gains event).

However I’m putting this up to see if anyone has ever done or thought about doing anything similar? Or if you’re active in the LIHTC or Opportunity Fund space what your initial thoughts are about combining these programs?