August 29, 2009

For thousands of low-income renters nationwide — but especially in rural towns and small cities — the recession is hitting home in an unexpected way.Nationwide, funding to build low-cost apartments has dropped by more than half in two years to $4 billion. Hundreds of projects can't get off the ground because the federal tax credits that help offset development costs are currently worthless to traditional investors.

Georgia, for example, typically funds about 30 projects a year using up to $20 million in federal tax credits. So far, only nine deals have closed for 2008 and none this year. In Savannah, one project was halted mid-development because of a financing gap."Everything is totally upside down from two years ago," says Laurel Hart, director of Georgia's office of affordable housing.For more than two decades, the government subsidized the development of low-income apartments with a special tax credit.