The Housing Tax Credit Program was designed as an incentive for construction and rehabilitation of housing for low-income households.
Developers of housing tax credit projects typically raise equity capital for their projects by syndicating the tax credits to investors who are willing to invest in the project. The investors' return is the annual tax credit and other economic benefits generated by the project.
The U.S. Department of Treasury annually allocates South Dakota in excess of $2 million. SDHDA, as the credit-issuing agency, is responsible for the administration of the tax credits to qualifying housing developers.
Projects eligible for housing tax credits involve construction and/or preservation of decent, safe, sanitary and affordable housing in areas of the greatest housing need. A minimum of either 20 percent of the total units must be available to tenants whose incomes do not exceed 50 percent of the area median gross income; or 40 percent of the total units must be available to tenants whose incomes do not exceed 60 percent of the area median gross income.
Eligible activities include new construction, substantial rehabilitation or acquisition with substantial rehabilitation. Substantial rehabilitation costs must be at least $10,000 per unit or 20% of eligible basis, whichever is greater.
To apply for housing tax credits, applicants must submit the HOME/HTC Application to the SDHDA office in Pierre by 5 p.m. on the last working day of August for the annual application round. SDHDA may hold additional application rounds if available tax credits remain. Housing tax credits are reserved and allocated statewide and on a competitive basis as outlined in the HTC Qualified Allocation Plan.