Dominion outlines financing and entitlement hurdles for affordable housing; board seeks follow-up session
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Summary
Dominion told the Industrial Development Board on Nov. 12 that high land prices, elevated capital costs and entitlement uncertainty are the main barriers to affordable-housing deals; speakers described a federal tax-test change that could increase bond availability but also warned of market impacts on tax‑credit pricing.
At the Nov. 12 ad hoc Industrial Development Board meeting, Austin Holmes of Dominion and Frank Hogan of Collier Securities briefed board members on national financing dynamics and the local implications for Nashville.
Austin Holmes said three headwinds dominate feasibility: elevated interest rates, construction pricing that remains above pre‑pandemic levels, and land prices that have stayed high because many landowners are not compelled to sell. "Land is the single biggest item that is not an eligible basis," Holmes said, explaining that low‑income housing tax credit (LIHTC) equity generally cannot cover land cost and therefore high land prices constrain deal economics.
Holmes described a federal change that reduced the LIHTC bond‑test requirement from 50% to 25% of eligible basis, which in practice could lower the amount of tax‑exempt bonds a deal must secure and — if states adopt enabling rules — increase bond availability for 4% LIHTC transactions. He cautioned the change has mixed effects: more deals could be done, but a larger supply of tax credits could put downward pressure on credit pricing and thus the equity proceeds to developers.
Frank Hogan (Collier Securities) said the pace and impact of the federal change will vary by state and noted implementation will be gradual in some places where state statutes limit allocations.
The presenters emphasized entitlement certainty and local tax abatements as key to feasibility. Holmes contrasted jurisdictions with predictable statewide abatements (examples cited: Florida, Texas) with areas that rely on municipal discretion, which can create a patchwork and complicate underwriting. He also noted local physical constraints, such as rocky soils in some parts of the Nashville market, raise site‑specific costs that affect feasibility.
The board asked questions about tax‑credit pricing, the timeline for state rule changes, and how local permitting changes could shorten development schedules. Dominion agreed to return for a longer ad hoc session to address zoning entitlements and local specifics in more depth.
The meeting record shows discussion and no formal financial commitments were made. The board adjourned at 10:04 a.m.
