(The Center Square) – A little known federal tax credit that existed since Ronald Reagan was president has a long way toward creating more affordable housing in North Carolina, the state director told The Center Square.

The Low-Income Housing Tax Credit will help developers build $1.47 billion in affordable apartments in North Carolina this year and 21,960 jobs and produce $95.3 million in state and local tax revenue, said Scott Farmer, executive director of the NC Housing Finance Agency, which administers the program launched in 1987.

“What it effectively did was create a state-by-state allocation of federal tax credits to create, effectively, equity, for a public private partnership to develop apartments and also rehabilitate existing apartments,” Farmer said.

Once approved for the tax credits, the developers can then sell them on the private market, at a reduced price, such as 80 cents on the dollar.

“They are generally purchased by large corporate entities that have large tax obligations,” Farmer said.

The money from the sale of the tax credits lowers the amount the developer has to borrow for apartment construction.

“That’s how you keep the rents down,” Farmer said. “Your bank debt is much smaller so that you keep your rents affordable. It’s the truest form of a public-private partnership because you have the state agency, the federal government and these private investors that are all participating as well as the developers.”

Allocations of the tax credit is based on a state’s population. North Carolina’s allocation is around $34 million a year.

“There is a long waiting list,” for the tax credits, Farmer said. “The problem with this program is that we don’t have enough resources to go around.”

While other federal programs have been on the chopping block this year, Congress approved a 12% increase in the Low-Incoming Housing Tax Credit program, Farmer said.

“It was one of the few things that was increased and shows the bipartisan support for this program,” the director said.

Construction costs, labor and rents have all been going up over the last five years, Farmer noted.

“Without these types of programs, it would be difficult if not impossible to make these kinds of properties available for families and seniors,” he said.