The Michigan State Housing Development Authority is using Walk Score to encourage real estate developers to create affordable housing in walkable neighborhoods.
Specifically, developments with a high Walk Score are awarded points that help projects qualify for low income housing tax credits.
How Do Low Income Housing Tax Credits Work?
The IRS runs a low income housing tax credit program called LIHTC (pronounced lie-tech) that provides a certain number of housing tax credits each year to states based on population. Real estate developers who meet the state criteria (known as a qualified allocation plan), compete for the tax credits.
Here’s where it gets interesting: Developers who are awarded the credits sell them at discounted rates to investors (e.g. a bank). The investors can apply these tax credits to any part of their federal tax bill.
Selling the tax credits allows the developer to reduce the debt required to finance their project. Since the property needs less income to operate, the developer can provide affordable rent for tenants. LIHTC is heralded as one of the most effective housing programs created by the federal government.
Why Use Walk Score for Low Income Housing Tax Credits?
Walkability is a key element in the tax credit application and MSHDA decided to use Walk Score because the agency liked the methodology, it’s easy to use, and it shows how walkable each site is. Up to 10 points may be awarded for walkability, which is a significant component of the overall score.
The Value of Place Making and Walkability
“It is no secret that Michigan is known as the comeback state and one of the reasons, an important one at that, is its focus on placemaking,” said Andy Martin, Manager of the LIHTC program at MSHDA. “We believe that by revitalizing communities and rebuilding neighborhoods, we can strengthen the entire state.”
“We have learned that young knowledge workers have a strong preference for urban walkability and neighborhood amenities are just as important to them as housing amenities,” said Jim Tischler, director of Community Development at MSHDA. “We believe placemaking and walkability are key factors in Michigan’s transformation. They want to be in places with both jobs and things to do, and we want to oblige them by giving them the walkable neighborhoods they so desperately want.”