When State Funding Tax Benefits Leave and Come Back

Tax credits or incentives from the State or a municipality are often what turns on the green light toward getting a build or a deal done for real estate developers and investors. Those factors can be the difference in an entire deal being worthwhile or a cause to pass. As much as researching the numbers, the location, demographics, and market trends is important when considering, there are still more considerations when government is involved.

 

The (below linked) situation involving a proposed affordable housing development on Chicago's north side is an example of a complicated situation. A $56 million dollar development project has been awarded based on state tax credits being issued, and meeting guidelines for eventual tenant income levels to be met upon completion. However, this project has been in the works for years, and was stalled when the State of Illinois Housing Development Authority was not awarded those same tax credits in 2023. 

 

Since I am not in any involved in this specific situation, I can't speculate as to whether or not there is additional investor risk in executing this project with the possibility of benefits not coming through within the next couple years. Chances are it has been addressed, and favorably for the developer and investors involved. 

 

There are lessons for those of us that work behind the scenes to create opportunities for real estate success. Those lessons starts with not giving up. We all know that some investors would head for the hills when the funds were not awarded in 2023. The next lesson is to revisit the numbers and the opportunity to be ready to move forward upon the funding being restored, which is what happened here.

 

Another factor is looking at the tenant income considerations and how possibly needing to adjust rents to meet guidelines could impact the future of the investment. It is possible that income increases will enable the landlord(s) to increase the rent while staying within guidelines. However, it is also possible that operation and replacement costs could rise to a point where the income potential is forced to be reduced.

 

Determining the rewards should be in relation to determining the risks. This developer that hung in there and plans to implement this project clearly hung in there and sees the long-term benefits. In this case, it takes a village to create one.

 

https://blockclubchicago.org/2025/07/23/howard-street-affordable-housing-project-moving-forward-with-state-tax-credits/