“By LEONARD SPARKS
Capital News Service

The plan to transform the dilapidated Guilford Gardens in Howard County into a modern complex of energy efficient apartments set within green space could easily have become another casualty of the sagging economy.

But a $2 billion pot of money in the federal recovery package has turned doubt into certainty for Guilford and other affordable housing projects partly funded with low-income housing tax credits.

Maryland’s $32 million share will help those projects avoid delays by compensating for the diminished value of those credits and a dearth of investors willing to buy them.

“”Needless to say, those of us in the affordable housing world are happy,”” said Trudy McFall, co-founder and chairwoman of Homes for America, an affordable housing builder based in Annapolis.

Homes for America is now preparing to renovate 116 apartment units in Cecil County for low-income households and build another 69 in Baltimore.

Both would likely have been delayed without the recovery money, said McFall, who is also a candidate for Annapolis mayor.

“”I don’t even want to think about where we would have been without the stimulus bill,”” she said.

Affordable housing across the country depends on low-income housing tax credits, which were born with passage of the Tax Reform Act of 1986. Individual investors and financial institutions buy the credits, sending capital to housing projects, while lowering their tax liability.

Projects using tax credit funding then must reserve either 20 percent of their units for households earning up to 40 percent of area median income or 40 percent at up to 60 percent.

While most projects rely on multiple sources of funding, including other government programs and private loans, the tax credits provide a significant boost.

“”In some developments, it’s more than half of the overall cost,”” said Corine Sheridan, director of low-income housing tax credit development for Boston Capital in Crofton. “”It is one of the most successful programs for low- and middle-income people in the country.””

The flagging financial markets have stifled that success, however. Gun-shy investors, struggling banks and a weakened Fannie Mae and Freddie Mac have retreated from the tax credit market.

A smaller pool of willing investors means sellers of tax credits pay more, Sheridan said.

Where sellers may have fetched 80 cents or more for each dollar of tax credit a year ago, buyers are now often offering less than 70 cents, Sheridan said. The higher yield for investors means projects receive less money for the same amount of credits.

“”It’s quite a dramatic drop,”” she said.

A study in Maryland estimated that the state would face a shortage of 157,000 affordable rental housing units by 2014.

Housing officials just released the names of 22 projects receiving low-income housing tax credits in its latest round of awards. The projects together were allocated more than $23 million in tax credits.

Without the assistance from the recovery package, just five of those credits would have received credits, said Patricia Sylvester, director of multifamily housing for the Department of Housing and Community Development.

“”The rest of the projects would have been told to come back and compete in the next round,”” she said.

One of those delayed projects could have been Guilford Gardens, according to its developer. Neither Guilford nor a 103-unit apartment development in Anne Arundel County would have gone forward without the recovery money, said Jeff Hettleman, vice president for Baltimore-based Shelter Development.

The impact of a delay at Guilford Gardens would have been especially acute, Hettleman said, because it is considered a key to improving the surrounding community.

The proposal calls for replacing a 100-unit complex that has a history of health and safety violations with 269 new apartments, 166 of them affordable and the rest market rate.

The planned amenities include a community center, tennis and basketball courts and walking paths. Construction is expected to begin toward the end of the year.

“”This is revitalizing that community,”” Hettleman said. “”It’s mixed income, it’s green, it’s smart growth.”””