Affordable Housing Funding Can Be Combined with OZ Investments
OZ investors will be most interested in projects that offer the best returns, are financially viable, and reduce their risk. Properties located in OZs can be targeted for any type of housing—market rate, mixed-income or low-income housing, or preservation efforts—provided it meets the needs of the investor.
To make affordable housing more attractive to investors, OZ investments can be used in conjunction with public funds or with investments via the LIHTC, New Markets Tax Credits, or Historic Tax Credit Programs. These sources can help ensure that investors have a reasonable rate of return and can help minimize project risk.
The net effect of combining public funds or tax credits with an OZ-generated investment is an increase of capital available for a transaction, helping to fill financial gaps in affordable housing transactions, such as those that include HOME and HTF funds in the capital stack.
OZs are relatively new. To date, only a few investors have developed affordable housing projects. As developers and investors learn more about affordable housing development opportunities, there is potential for more to be done.