Early this decade, the Legislature made one of the most consequential moves to increase the number of residential units that our workforce can attain. The state implemented a Low Income Housing Tax Credit policy that provided a financial incentive to developers to build affordable housing.

And in just the last four years, the decision to adopt a Low Income Housing Tax Credit policy paid dividends by prodding developers to bring new low-income housing options to cities and rural areas across the state.

However, this tool faces a sunset this year. Legislation to extend Low Income Housing Tax Credit is still alive and may find its way into the budget under negotiation now. That would be ideal given the significant impact the Low Income Housing Tax Credit policy has had in a short amount of time.

Housing units for our workforce and low-income senior population sprouted from the ground in new construction and converted, underutilized buildings.

In 2021, the Legislature created the tax credit program with a four-year life span. Its time is up unless the Legislature acts again. And developers are talking about the benefits. For the Low Income Housing Tax Credit legislation, Sen. David Gowan convinced his colleagues to ensure that some of these projects were built in rural areas.

One of the most important aspects of the tax credit program is that money doesn’t come out of state coffers until after the units are built and occupied. That means the state benefits from construction activity and a new affordable housing project before the state spends a dime. A study by local economist Elliott D. Pollack & Co. found that developments taking advantage of the tax credit have already created nearly $750 million in economic activity and more than 4,500 construction jobs.  

At a recent bipartisan housing caucus event, developers exhibited to the assembled Republican and Democratic legislators several projects that would not be under construction today but for the state’s Low Income Housing Tax Credit.

Gorman & Co. turned an old, dilapidated school in Globe into a low-income senior living apartment complex. The gym’s second floor now features a walking track for the seniors for those days when the weather makes it dangerous to exercise outside.

“That’s the only way you can build these things,” Brian Swanton, president of Gorman, told the housing caucus. “You can’t get a loan. The cost of the loan is more than you are getting from the rents.”

Another affordable housing development from Gorman is Centerline on Glendale, a 13-acre project with 368 units. The $20 million in tax credits Gorman used will be offset by the $30 million in taxes collected during the first 10 years of occupancy. The development includes a commercial kitchen leased to Local First Arizona and designed to help incubate small businesses.

As noted, financing for low-income developments can be difficult to obtain because rents are often capped at a percentage of the median income levels of the area. Without state and federal programs such as the tax credit, these projects would die on an architect’s drawing table.

But because of the tax credit, projects Centerline and Hill Street School in Globe now exist and hundreds of people call them home. The tax credit is an integral tool and lawmakers and Gov. Katie Hobbs should reinvigorate the program with a new lease on life. Arizona’s low-income housing needs can’t be solved with one piece of legislation, but we have seen in the last four years the vast amount of good that these tax credits provide for a sliver of state investment.

Reid Butler is owner of Butler Housing Company, Inc. and co-chair of the Arizona Multihousing Association Developer SubCommittee.