This policy smells like it is more ignorant than malicious, but for those in the affordable housing industrial complex who want to end capitalism through nationalizing housing, this policy would help achieve that end. That crowd very much beleives only non-profits should build housing, and they are establishing that beachhead with affordable housing, seeking ot push all for-profits out of markets. Idiotic policies like the one you suffered are just one of many that are destroying afforadable housing markets (If you could even call what we have left "a market").
Correct. The problem is that this industry is being engulfed with malicous people who leverage non-malicious problems for their malicious intents. They look for openings like this, all the time.
This comment goes way beyond your post and fine work, but I do wonder if collectively we'd do better by reducing spending on these subsidy programs (>200K/unit) and simply providing wage supports where the gov't pays lower wage workers and extra ~$5/hour and perhaps more for those with dependents. I've been involved in grants from the feds that go through the state. The administrative costs between the grantors and grantees is huge, and the $ often comes very slowly. Maybe if people just had more income we could shrink programs that cost a lot to adminsiter (grants). That could have political traction across the political spectrum as it incentivizes work while also raising wages and buying power.
Without any subsidy, we would have had to charge $2k+/mo in rent for a 1BR/1BA just to cover costs. That’s out of reach for most people in our area, even with some wage support. Would be an interesting experiment though!
For many reasons, it does seem that VT is simply not a great to have a low income. We all know it's much less expensive to build in the south. How much do you think it's due to wages vs. regulation? I have only anecdotal info (relative builds in W NC) that wages here are ~2x the south, likely indicating much of the cost differential is wages. Of course, building in cold climates requires much more insulation and air sealing and better foundations, also more $. I have a crazy idea to build a large house and 'import' workers from the south, providing them housing and higher wages than what they were used to but < local prevailing. Less cost->lower rents.
LIHTC developer here (well spouse of); as you probably already figured out, that money needs to be a loan, not a grant, that you pay back in 20 yrs, zero interest. Even if municipalities offer grants, take it as a 20 yr interest free loan. I was reading your predicament to him, and that was his response. Keep at it!!
Hi Jonah, I'm sure you explored this, but you didn't mention why it doesn't apply in the article. If you have receipts for those construction costs, why don't those construction costs offset the grant income in this tax filing? If you chose to treat those construction costs as a depreciable asset (i.e., the cash value of the building), you would depreciate a fraction of those costs each year on your taxes to cancel out future profits. I'm not a bookkeeper anymore, but I'm surprised a tax consultant can't structure your filing (legally, of course) to soften the impact of that tax bill.
This is most unfortunate and I'm so sorry you're going through this. You're doing great work. I'm a bit confused how 1.1M can create a .5M tax bill. I believe the corporate tax rate is 28%. Maybe VT is also taxing you and there are fines for not paying on time? I guess we know why affordable housing is built almost exclusively by not for profits.
that is rough. I wonder if the state grants (up to 50K per affordable unit) are likewise considered taxable income? I had considered using the program, but between the requirement of 5 years of ~1100/month for rent including all utilities and inability to choose the tenants, it likely only makes sense for non-profits.
You’re talking about VHIP? Even though they’re now structuring those as deferred loans, you’re still going to pay income tax on that when the loan gets deferred
Oh my goodness, this is crazy! some homeowners got a similar shock when they accepted VHIP grants. The state has changed the program now to make it a loan.
This policy smells like it is more ignorant than malicious, but for those in the affordable housing industrial complex who want to end capitalism through nationalizing housing, this policy would help achieve that end. That crowd very much beleives only non-profits should build housing, and they are establishing that beachhead with affordable housing, seeking ot push all for-profits out of markets. Idiotic policies like the one you suffered are just one of many that are destroying afforadable housing markets (If you could even call what we have left "a market").
Agreed, I don't think it's malicious. Feels more like an oversight in the tax code.
Correct. The problem is that this industry is being engulfed with malicous people who leverage non-malicious problems for their malicious intents. They look for openings like this, all the time.
This comment goes way beyond your post and fine work, but I do wonder if collectively we'd do better by reducing spending on these subsidy programs (>200K/unit) and simply providing wage supports where the gov't pays lower wage workers and extra ~$5/hour and perhaps more for those with dependents. I've been involved in grants from the feds that go through the state. The administrative costs between the grantors and grantees is huge, and the $ often comes very slowly. Maybe if people just had more income we could shrink programs that cost a lot to adminsiter (grants). That could have political traction across the political spectrum as it incentivizes work while also raising wages and buying power.
Without any subsidy, we would have had to charge $2k+/mo in rent for a 1BR/1BA just to cover costs. That’s out of reach for most people in our area, even with some wage support. Would be an interesting experiment though!
For many reasons, it does seem that VT is simply not a great to have a low income. We all know it's much less expensive to build in the south. How much do you think it's due to wages vs. regulation? I have only anecdotal info (relative builds in W NC) that wages here are ~2x the south, likely indicating much of the cost differential is wages. Of course, building in cold climates requires much more insulation and air sealing and better foundations, also more $. I have a crazy idea to build a large house and 'import' workers from the south, providing them housing and higher wages than what they were used to but < local prevailing. Less cost->lower rents.
LIHTC developer here (well spouse of); as you probably already figured out, that money needs to be a loan, not a grant, that you pay back in 20 yrs, zero interest. Even if municipalities offer grants, take it as a 20 yr interest free loan. I was reading your predicament to him, and that was his response. Keep at it!!
Hi Jonah, I'm sure you explored this, but you didn't mention why it doesn't apply in the article. If you have receipts for those construction costs, why don't those construction costs offset the grant income in this tax filing? If you chose to treat those construction costs as a depreciable asset (i.e., the cash value of the building), you would depreciate a fraction of those costs each year on your taxes to cancel out future profits. I'm not a bookkeeper anymore, but I'm surprised a tax consultant can't structure your filing (legally, of course) to soften the impact of that tax bill.
Yes, some of it can be depreciated. But even with cost seg, we’re looking at a 10% reduction. That doesn’t move the needle a whole lot
So sorry this is happening to you!
Thanks for your support!
This is most unfortunate and I'm so sorry you're going through this. You're doing great work. I'm a bit confused how 1.1M can create a .5M tax bill. I believe the corporate tax rate is 28%. Maybe VT is also taxing you and there are fines for not paying on time? I guess we know why affordable housing is built almost exclusively by not for profits.
It's being treated as personal income tax at the highest bracket—45% between state and federal!
that is rough. I wonder if the state grants (up to 50K per affordable unit) are likewise considered taxable income? I had considered using the program, but between the requirement of 5 years of ~1100/month for rent including all utilities and inability to choose the tenants, it likely only makes sense for non-profits.
You’re talking about VHIP? Even though they’re now structuring those as deferred loans, you’re still going to pay income tax on that when the loan gets deferred
Oh my goodness, this is crazy! some homeowners got a similar shock when they accepted VHIP grants. The state has changed the program now to make it a loan.
The loan is still taxable though once forgiven after 10 years!
Wow, that's a huge tax bill...That's a tax bill for a year on that property overall?
Also, did they NOT make it clear when applying for the Grant etc? That seems like it's a complete non-incentive!
Good luck!
That's income tax, not property, just to clarify. And yes, the grants are 100% taxable in the year they are paid out.
This is terrible! Vermont needs you as a builder who knows the reality of construction. I hope this can be resolved.
Appreciate your support!