New York State Senate Bill S9571, set to be presented to NYS Governor Kathy Hochul, offers an encouraging outlook for stakeholders in the state’s low-income housing sector. If signed into law, the amended legislation would permit multiple successive transfers of New York State low-income housing tax credits (SLIHTCs)—a significant change from the existing regulation.
Under the current law, a taxpayer who owns one or more interests in a low-income housing building may transfer their SLIHTCs (Transferred Credits) to a third party (Transferee), who may then claim the benefit of those credits. However, existing law prohibits the Transferee from subsequently conveying the Transferred Credits to another party, effectively limiting the SLIHTCs to a single transfer.
The proposed legislation would allow a Transferee to transfer the credits to another person or entity, subject to approval and documentation by the NYS Division of Housing and Community Renewal (HCR). Importantly, any such SLIHTC transfer would not affect the underlying housing project’s eligibility for SLIHTC program benefits.
Amendments to the current law intend to address the following topics:
- Preservation and Financing Support. By allowing SLIHTCs to change hands multiple times, subject to HCR approval, the amended legislation aims to strengthen the long-term preservation of low-income housing projects and expand available financing options.
- A Secondary Credit Market. The bill would back the development of a secondary market for SLIHTCs, attracting an additional class of buyers and improving overall market liquidity, further helping address stagnation in credit transactions.
- Broader Market Participation. Increased flexibility would open the market to a broader array of investors, allowing credits to reach those best suited to optimize their use.
- Reduced Reliance on Public Funding. Developers would gain an alternative avenue to address financing gaps through private channels, easing existing constraints and creating more direct and accessible sources to project financing.
Low-income housing project partners remain hopeful that this change will bring a positive impact to the industry. Barclay Damon’s Tax Credits Team attorneys will continue to monitor this legislation and provide further updates.
If you have any questions regarding the content of this alert, please contact Karina Shahine, associate, at kshahine@barclaydamon.com; Danielle Katz, counsel, at dkatz@barclaydamon.com; or another member of the firm’s Tax Credits Team.