Welcome Home Ohio: County Land Banks Setting the Table for Affordable Housing Development

Jeffry Harris, Ext. 4860, jharris@brickergraydon.com
Date: July 17, 2023 – for immediate release

Welcome Home Ohio: County Land Banks Setting the Table for Affordable Housing Development

 Buried deep in its 6,198 pages, Ohio’s recently enacted operating budget (Am. Sub. House Bill 33) authorizes the creation of a dual-track grant/tax credit program for near-exclusive use by land banks (both municipal and county types) for affordable housing development. We have previously shared that land banks – particularly county land bank-types – should consider taking their well-deserved seat at the economic development table. The Welcome Home Ohio Program catapults land banks into the role of executive chef, at least when affordable housing is on the menu. That said, the lengthy list of recipe ingredients that must be used to access this form of public financing may diminish the appetites of affordable housing market participants.

Newly enacted Ohio Revised Code Section (R.C.) 122.631 through R.C. 122.633, effective October 3, 2023, directs the Ohio Department of Development (ODOD) to implement the Welcome Home Ohio Program (WHO), with grant funds exclusively available to land banks[1] and tax credits available to a limited set of eligible entities.[2] These public financing tools are available for the development of single-family residential units comprising at least 1,000 square feet of living space.[3]

Purchase Grants

Land banks may apply for, and receive, grants from ODOD to purchase single-family residential units to become part of those land banks’ land reutilization programs under R.C. Chapter 5722.

Grants are awarded “[t]o the extent that funding is available” in the Welcome Home Ohio Program Fund (Dedicated Purpose Fund 5AP1); during each state fiscal year (SFY) 2024 and SFY 2025, the General Assembly appropriated $25 million for such purchase grants.

Rehabilitation/Construction Grant Track
In addition – or available in their own right – grants may be obtained from ODOD by land banks to offset the costs of rehabilitation or construction of single-family residential units, with each grant capped at $30,000 per unit. During each SFY 2024 and SFY 2025, the General Assembly appropriated $25 million for rehab/construction grants.

Note that to seek and obtain a grant of funds for such rehab / construction work, land banks cannot also seek a tax credit for the same work on the subject property.[4]

Rehabilitation/Construction Tax Credit Track

In addition – or available in their own right – tax credits may be obtained from ODOD by land banks and eligible developers to support capital stacks for rehabilitation or construction of single-family residential units, with each tax credit capped at $90,000 or 1/3 of project costs (whichever is less). The General Assembly capped total credits at $25 million in each of SFY 2024 and SFY 2025.

Tax credits are fully transferrable to “any person” (i.e., syndication) and are taken against taxpayers’ state financial institutions or personal income tax obligations. Unused tax credits may be carried-forward for up to five years.

Applicants may approach ODOD for such tax credits after the subject property has sold, otherwise demonstrating that restrictions set forth below have been followed.

Likewise, to seek and obtain a tax credit for such rehab/construction work, land banks cannot also seek a grant of funds for the same work on the subject property.[5]

Program-wide Restrictions

Across the WHO’s dual-track public financing, grant fund and/or tax credit recipients must satisfy a lengthy list of conditions. As the program rolls out during fall 2023, we’ll be watching carefully for Ohio’s affordable housing market to respond favorably – or not – to the following requirements, all of which must be continuously satisfied, in some cases for up to twenty years:

• Eventual buyers cannot earn more than 80% of the median income for the county in which the subject property is located; those buyers must participate in a financial literacy course conducted by the land bank seller.
• Those buyers must commit – via the purchase sale agreement with the land bank seller – to use the subject property only as a primary residence, and they cannot rent “any portion” to others for five years (on these points, the buyer must report to ODOD annually).
• The subject property will have recorded against it restrictive covenants limiting future buyers to only those who likewise don’t earn more than 80% of the county median income; this affordability period is twenty years (the list of such properties with restrictive covenants is not a public record under Ohio’s Sunshine Laws[6]). The ODOD is given standing to sue in court to enforce these restrictive covenants.
• The subject property cannot be sold for more than $180,000.
• Unused (in the case of purchase grant funds) or misused WHO funds must be returned to ODOD.

Note that under rules still forthcoming from ODOD, there must be an “even geographic distribution” of grants and tax credits throughout Ohio.[7]

[1] The WHO makes available, exclusive to electing subdivisions or county land reutilization corporations, purchase grants and rehab/construction grants. As to “electing subdivisions,” the WHO uses the same definition as under Ohio’s land banking law, which includes municipal or township land banks (i.e., limited authority land banks under R.C. Chapter 5722; also referred to as “passive” land banks).  County land reutilization corporations (i.e., full-authority county land banks) are specifically included. See R.C. 122.631(A)(1).

[2] The WHO’s rehab/construction tax credit is available to electing subdivisions or eligible developers, the latter of which are comprised by affordable housing-focused nonprofits (notably including community improvement corporations) and for-profit pass-through entities in which such nonprofits are members. See R.C. 122.633(A).

[3] “Qualifying residential property” is defined under R.C. 122.631(A)(3) to capture limited multi-family development, namely: “multi-unit property containing not more than ten units.”

[4] See R.C. 122.632(B)(8).

[5] See R.C. 122.633(C)(7).

[6] See R.C. 122.631(B).

[7] See R.C. 122.631(G)(1)(c); R.C. 122.632(D)(1)(c); and see R.C. 122.633(G)(3).