THDA Tax Credits make developing affordable housing a reality
Jake Varner and his father, David – owners of the development firm Southeast Capital TN – saw the growing need for more affordable housing in Knoxville.
The pair previously developed multi-family at market rate in the area, but after talking with city leaders about Knoxville’s housing needs they decided to develop more affordable units in the city.
“We both really enjoy the development side and we had some conversations with various people in the city about what a great need there was in Knoxville for affordable housing,” Jake Varner said. “We felt this could be a new avenue for us to go down. It was a more complex process to develop, but we really liked it.”
For Jake, who grew up in Knox County, building affordable housing was about more than just the development deal itself.
“It’s so rewarding to be able to do the thing we like in development and we’re passionate about and at the same time help people in the community,” he said.
Southeast Capital has built two complexes in East Knoxville already – Burlington Commons and the Ammons – and are currently building two more developments in North Knoxville’s Inskip neighborhood. When finished, the four properties will account for almost 400 units of affordable housing.
Varner said none of those developments would have been possible without Low Income Housing Credits allocated by Tennessee Housing Development Agency.
The LIHC program is administered in Tennessee by THDA and provides funding for the acquisition, rehabilitation or new construction of affordable multifamily apartments.
“Without the tax credits you couldn’t do these deals,” Varner said. “The whole key on these, if it’s an affordable deal it means you’re not going to get the same rents as you would market rate, so you’re looking at $800 to $900 a unit lower, and to make up for that you have to have some additional source of capital and that’s where these tax credits come in.
“Tennessee is fortunate, there are good incentives for developers to build these and without the tax credits and the bonds there’s no way these deals would come together.”
In addition to providing affordable housing for those who need it most, Varner said the developments also help improve the communities they are built in.
“It makes you feel good to know you’re making a difference in the city. It feels like we’re helping improve area and we’re building something aesthetically pleasing, while at the same time people can afford to live there.”
Varner said the quality of the units he and his father have built should also help change the perception of affordable housing in the city as more people become familiar with them.
“I think people have a lot of preconceived notions about affordable housing, but it’s for the people who work in the communities you live in,” Varner said. “I think a lot of people have a misconception about what affordable housing is, they think it’s the old public housing model. I could show you 10 apartment complexes in Knoxville that you wouldn’t be able to tell which ones are affordable and market rate. Being able to help people move into this high quality and safe affordable units is really a rewarding part of this.”