Builder Developer Model Analysis of Federal Tax Policy Impacts: Low Income Multifamily Housing Production Incentives in the Chicago Region

摘要

The builder - developer model uses traditional cash flow analysis to simulate the impact of housing and tax policy on a large survey of actual low - income multifamily projects predicting short - run changes in rates of return and subsidized housing production. The model calculates the return received by a profit - motivated builder - developer who sponsors a subsidized project and then sells a majority of the ownership interest to passive investors through a limited partnership mechanism. This builder - developer return is derived from two sources. First, the builder - developer realizes an entrepreneurial reward at the time of syndication for initiating and sponsoring a subsidized project. Second, since the builder - developer typically retains a minority interest after syndication, he receives a share of ownership benefits generated through the project's life. The model distinguishes between builder - developer return and the return realized by passive investors, who, through syndication, own the majority interest in a project. The model was implemented using data on subsidized projects in the Chicago, Ill., region that have received FHA insurance and projects financed by State finance and housing agencies in Illinois, Michigan, Wisconsin, and Minnesota. Levels of production under alternative policies are predicted using a derived probability distribution representing the likelihood that a builder - developer will pursue a project. Several improvements in the model are recommended. Tables and figures are provided. (Author abstract modified).