Housing finance agency warns cutting attainable housing grants would breach investor agreements

SALT LAKE CITY — Utah Housing Corporation told the Senate subcommittee that pulling state attainable housing grants from eight federal low-income housing tax credit (LIHTC) developments would create investor covenant breaches and threaten ongoing construction.

“We have private funding sources committed to these developments including over $117,000,000 invested in federal low income housing tax credits and $45,500,000 in bank debt,” David Damson, president and CEO of Utah Housing Corporation, told the committee. He said developers and lenders relied contractually on the state grant commitments and that rescission “would create extremely significant problems for these developments, their developers, investors and lending institutions.”

Why it matters: The attainable housing grants support projects targeted to very-low-income residents — including disabled veterans, seniors on fixed incomes and families exiting homelessness — and state funding was cited in presentations as a condition for layered financing. Several committee members and DWS staff warned that cutting those grants could cause cascading funding losses for projects under construction.

Department of Workforce Services staff proposed an alternative approach: rather than rescinding the $2.9 million in attainable housing grants, they suggested replacing that reduction in the cut list with a $2.75 million ongoing rural single-family revolving loan program that would provide project-based, no-interest loans and avoid ongoing layered commitments. "It removes ongoing commitments and avoids the layered funding issues," Deputy Director Kevin Burt told the committee.

Committee members asked for caution and for legislative staff and the Legislature’s fiscal analyst to work with agencies on any swap, since investors and lenders have already relied on the state commitments. No final appropriation action was taken at the hearing.