Pub. 12 2023 Issue 1

Bankers Partner With KHRC to Strengthen Communities

This story appears in he
The Kansas Banker Pub 12 2023 Issue 1

Do you remember in grade school how the dot-to-dot pictures magically formed on the page? Seemingly unrelated dots connected to reveal a picture. As the state’s housing finance agency, we at Kansas Housing Resources Corporation (KHRC) often describe ourselves as “dot connectors.” We don’t provide housing directly to Kansans; instead, we connect communities to the right service providers, partners, and resources they need to secure quality, affordable housing. This essential behind-the-scenes work includes awarding tax credits to incentivize the development of affordable housing; administering our state’s Section 8 contract to ensure affordable housing is decent, safe, and sanitary; providing down payment assistance so Kansans can realize the dream of homeownership; and so much more.

Banks and lending institutions play a crucial role in this collaboration, serving as financing partners, advocating the importance of stable, quality housing for a healthy economy, and being a wealth-building opportunity for families and communities. The 2022 legislative session brought a historic state investment in housing, due in part to the advocacy of the KBA who made the case for housing to our leaders in the Statehouse. Whether you’re a small community bank or a branch of a regional institution, there are a number of ways to partner in expanding housing opportunities and strengthening communities across the state.

Housing Development Programs

Our Housing Development programs provide opportunities for lenders to grant loans and buy tax credits to create or rehabilitate quality, affordable homes across the state.

  • Low Income Housing Tax Credit (LIHTC): The LIHTC encourages investment of private capital in the development of rental housing by providing credits to offset an investor’s federal income tax liability. Financial institutions, such as banks, insurance companies, and government-sponsored enterprises, make equity investments in exchange for receiving tax credits. Equity from the sale of tax credits reduces the amount of debt financing the property owner incurs. This process reduces the property’s monthly debt service, lowers the operating costs, and makes it economically feasible to develop affordable housing. KHRC administers the state’s federal tax credits as well as a state tax credit established by the Kansas Legislature in 2022. LIHTCs are often paired with HOME Rental Development and National Housing Trust Fund resources to target underserved communities in need.
  • Moderate Income Housing (MIH): The state’s flagship housing program, MIH, serves Kansans who earn too much to qualify for federal housing assistance but may struggle to afford market-rate housing. Established in 2012 with an annual allocation of $2 million, MIH grants and/or loans are awarded to cities and counties to develop multi-family rental units and single-family, for-purchase homes in communities with populations of fewer than 60,000 people. In 2022, the program experienced a significant influx of resources with an additional $60 million allocated from the State General Fund and ARPA funds as well as a newly established Rural Housing Revolving Loan Program.
  • Kansas Housing Investor Tax Credit (KHITC): Also in 2022, Statehouse leaders established a new credit for qualified investors who make cash investments in qualified housing developments in counties with up to 75,000 residents.

Homeownership Opportunities

Purchasing a home is often the most important investment a Kansan will make, and one of the most effective ways families can build wealth and prosperity. KHRC offers two programs designed to bring the dream of homeownership to more Kansans:

  • Home Loan Guarantee for Rural Kansas (HLG): Also established by the Kansas Legislature in 2022, the HLG program evens the playing field for Kansans seeking to purchase or rehabilitate a home in rural counties. For many rural homebuyers, the cost of purchasing or renovating a home often exceeds the home’s appraised value due to a lack of comparable properties in the area. HLG helps financial institutions guarantee the gap under a loan used for land and building purchases, renovation, and new construction costs capitalized or financed within Kansas counties that have a population of less than 10,000. HLG guarantees the amount of the loan that exceeds 80% of the appraised value of the home, up to 125% of the appraised value of the home subject to the loan. Each guaranteed amount shall not exceed $100,000. Financial institutions that serve rural homebuyers request loan guarantee funds from KHRC. Eligible institutions include banks, trust companies, savings banks, credit unions, savings and loan associations, or any other lending institution.
  • First Time Homebuyer Program (FTHB): KHRC helps enable the dream of homeownership by offering first-time buyers assistance with down payments and closing costs. KHRC collaborates with a network of participating lenders across the state, allowing homebuyers to apply for a 0% interest loan in the amount of 15% or 20% of the home’s purchase price. If the homebuyer remains in the home for 10 years, the loan is forgiven! The federally funded program serves Kansans who have a median income at or below 80% of their area. Homebuyers must make an investment of 2% but no more than 10% of the sale price from their own funds. The program serves Kansans across the state with the exception of those in Johnson County, Kansas City, Lawrence, Topeka, and Wichita. These areas administer their own federal funds, which may or may not be used for homebuyer assistance.

Bankers and lenders also played a crucial role in providing pandemic relief to homeowners in financial distress. The Kansas Homeowner Assistance Fund (KHAF) helps qualifying Kansans get current on their mortgages and property taxes and avoid foreclosure, providing assistance with mortgage reinstatement, mortgage payments, property taxes and charges, and utility and internet/broadband services. Assistance is paid directly to lenders, mortgage servicers, and service providers, who apply the funds to the homeowner’s account. Launched in April 2022, the program has expended nearly all available funds and is now in Final Funding, the first of three closure phases. In less than a year, this crucial partnership with financial institutions has already provided nearly $37 million to 3400 Kansas families.

Housing intersects so many aspects of our society, from jobs to families and education to health care. KHRC relishes our role in connecting those dots, but lenders are integral to the finished picture … Home. Will you join us?

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