City Council Monday night gave a show of support in the Whitefish Housing Authority’s quest to secure low-income housing tax credits and pledged city funds up to $150,000 for the purchase of property for a proposed 38-unit affordable housing development.

“Your support and financial commitment are very important to the success of the project,” said Ben Davis, chair of the housing authority board. “This is an important step for the housing authority and the community.”

The housing authority is working with the nonprofit Homeword of Missoula to develop a proposal to apply for low-income housing tax credit, which is a federal income tax credit for owners of rental housing that meets certain low-income occupancy and rent limitation requirements.

Heather McMilin, housing development director for Homeword, said two hours before the Council meeting she got word that a purchase option had been secured with an owner for a site on Edgewood Place.

“We believe we can get this funded and get you 38 units,” she said. “We believe we can leverage the funds we are asking for and bring in a lot of outside resources.”

McMilin said the city’s support of the project and commitment to spend up to $150,000 on the purchase of the land will go a long way in the housing authority’s application to the Montana Board of Housing, which is the state agency that allocates the tax credit for housing in Montana.

The city will likely purchase the property and then sell it to the housing authority at 75 percent of the original purchase price, according to City Manager Adam Hammatt.

The tax credits would likely provide about 75 to 80 percent of the total project cost as a significant funding source. The housing authority is looking at a $7 million to $8 million project and hoping to obtain about $6 million in tax credit. The remainder of the funding would come from loans and smaller grants, Hammatt noted.

Mayor John Muhlfeld noted that the city plans to use tax increment finance funds for its $150,000 contribution rather than general tax funds.

“We think this is a wise use of TIF,” Muhlfeld said. “This is something we should have moved on long ago.”

The housing authority and Homeward would act as developers and owners of the project so that it would remain affordable in perpetuity. Once its constructed they would use a professional housing management company to handle leasing.

The project is planned to provide affordable housing for people in the 40 percent to 60 percent of area median income range. For a one-person household that is $18,680 and for a five-person household that is $43,260. Rents are projected to be about $400 to $800 per month and the project is planned to include one-, two- and three-bedroom units.

“This is for low- to moderate-income housing,” McMilin said. “They will be deed restricted. It will be truly affordable.”

McMilin said the seller of the property planned to house the project is “patient” and willing to step through the hoops of securing the funding for affordable housing.

Preliminary numbers show the city would purchase the land for $632,000 and sell it to the housing authority at $484,000. The housing authority plans to contribute $50,000 to the purchase and would also save a portion of the site for future housing projects.

Low-income housing tax credits are the largest source of new affordable housing in the United States. Applications for the tax credits are competitive with about five projects getting funding while more than 25 typically apply each year.

McMilin says the plan is to tell Whitefish’s story about why the need for affordable housing here is so great and different than other cities in the Flathead Valley.

“We will tell them how employers are having to pay $2 to $3 more per hour for employees and that people are forced to commute because it is very difficult to find housing,” she said.

The housing authority will begin the process of applying for the credits by submitting a letter of intent for its application this month. Then if the housing board approves the letter, then a full application will be submitted in August. Projects should be notified of funding in November.

“We’ve tried this before and it has not been successful,” said Davis. “But this time we’re trying a new approach with the housing authority being hands on and we think we have a very strong application.”

A proposal for an affordable housing complex on Highway 93 South two years ago was unable to move forward after not receiving funding from federal tax credits.