LIHTC Tag Archives

Rep. Brady Announces Draft Tax Measure; Text to be Circulated Soon

House Ways & Means Chairman Kevin Brady (R-TX) has announced he has completed a draft tax measure to fix the “retail glitch” in the new tax law and address many tax extenders.  The draft measure is expected to be circulated in the next few days. It is unclear at time of press whether any affordable housing, historic rehabilitation or New Markets Tax Credit provisions are included in Chairman Brady’s draft, which is said to include between 70-80 alterations to last year’s the tax law, HR 1.  The measure is a potential vehicle for several NH&RA priorities including fixing the 4 percent LIHTC rate, basis adjustment provisions for the historic credit and an extension of the NMTC, which is set to sunset next year.  We will update this story as it develops.

Oregon Housing Stability Council Sets Nov. 2 Agenda

The next Oregon Housing Stability Council meeting will be on Friday, November 2. The meeting will be held at Oregon Housing and Community Services (725 Summer St NE, Salem OR) in Conference Room 124 A/B.

If you cannot attend in person, please join us by phone at: 1-877-273-4202; Participant Code: 4978330

AGENDA:

9:00        Meeting Called to Order – Roll Call

9:05        Public Comment

9:15        Meeting Minutes for Review – October 5, 2018

9:20        Housing Stabilization Update: Claire Seguin, Assistant Director, Housing Stabilization

  • Governors Proclamation, Weatherization Day: James LaBar
  • Weatherization Month Presentation: Keith Kueny; Energy Policy Coordinator CAPO, Rogelio Cortes; Weatherization Program Director, Mid-Willamette Valley Community Action, Randy Olsen; Energy Conservation Program Manager, Washington Co. Community Action.
  • Energy Efficiency Executive Order: Dan Elliott, Senior Policy Analyst, OHCS, Ruchi Sadhir, Associate Director, Strategic Engagement & Development, Oregon Department of Energy, Blake Shelide, Facilities engineer, Oregon Department of Energy, Alex Buylova, Research Analyst, OHCS, Mitch Hannoosh, Research Analyst, OHCS, Shelley Beaulieu, Senior Program Manager, Consultant, TRC Energy Services
  • Budget Note Subcommittee Update: Jimmy Jones, Interim Director, Mid-Willamette Valley CAA

10:40     Break

10:55     Statewide Housing Plan – Revised Draft: Lorelei Juntenan, EcoNorthwest

11:30     Housing Finance Update: Julie Cody, Assistant Director, Housing Finance

  • Multifamily Funding Decisions: Heather Pate, Multifamily Section Manager
    • Conduit Bond: Magnolia 2, Brad Lawrence, Loan Officer
    • Conduit Bond: Two Rivers, Joanne Sheehy, Loan Office
  • Oregon Bond Residential Loan Approvals & Quarterly Report: Kim Freeman, Single Family Section Manager, Megan Bolton, Senior Research Analyst
  • LIFT Framework Decisions: Amy Cole, LIFT Program Manager
  • Manufactured Park Preservation NOFA Criteria: Ed Brown, Program Manager and Natasha Detweiler-Daby, Senior Housing Finance Policy Analyst

12:30     Report of the Director

12:50     Report of the Chair

1:00       Meeting Adjourned

Please click here to access the Meeting Materials Packet.

Freddie Mac Publishes White Papers on Rural Affordable Housing in Appalachia & Indian Country

Freddie Mac has published two new white papers titled, “Spotlight on Underserved Markets: LIHTC in Rural Middle Appalachia”  and “Spotlight on Underserved Markets: LIHTC in Indian Areas.”

In the first paper, Freddie Mac explores Middle Appalachia’s multifamily housing market with a special focus on the primary means of developing affordable housing in undeserved markets: the Low-Income Housing Tax Credit (LIHTC) program. We take a look at the market size of this subsidy program, including the geographic distribution of properties receiving LIHTC allocations, its importance in serving lower-income households, and we highlight some challenges to development based on demographic, economic and topographical factors.  Below are some of the key findings of the research:

  • There are 5.4 million residents in rural Middle Appalachia as defined by Duty to Serve. This represents 1.7 percent of the total U.S. population and 7.2 percent of the nation’s rural population.
  • The population of rural Middle Appalachia skews older than the nation as a whole.
  • Income in rural Middle Appalachia is 40 percent lower than the national average and 20 percent lower than the rural average.
  • Rental housing, and multifamily rental housing in particular, is rare in rural Middle Appalachia. Only 26.7 percent of households are renters (compared to 36.4 percent nationally). Of these renter households, only 16.7 percent rent multifamily units (compared to 42.6 percent nationally).
  • Developing new rental housing often requires multiple sources of capital. The LIHTC program is the most popular housing subsidy for providing affordable housing and, on average, supports about 25 properties in rural Middle Appalachia each year.
  • Although LIHTC properties support a small percentage of all households in rural Middle Appalachia compared with the nation, they support a relatively high percentage of Middle Appalachian multifamily renters and play a vital role in providing affordable rental housing for tenants who would otherwise be severely rent-burdened.

In the second paper, Freddie Mac aims to provide clarity on the definition of Indian Areas and explore the role that the
LIHTC program plays in providing affordable multifamily rental housing for tribal members throughout the nation. It examines the market size of this subsidy program, as well as demographic and economic characteristics of Indian Areas, and we highlight some challenges to LIHTC development that are unique to this market.  Some of the key findings of the research:

  • Multifamily rental housing is rare in Indian Areas. The multifamily stock that does exist typically requires housing subsidies, namely the LIHTC program.
  • Debt financing for LIHTC housing is very limited. As such, projects heavily depend on tax credit equity and housing grants.
  • LIHTC properties in Indian Areas tend to be very small. Only 3.4 percent of the properties have 100 or more units, compared with 23.3 percent in the nation.
  • Set-asides for tribal LIHTC projects are offered by three states, while several others have preferences for projects that serve this population.
  • The poverty rate and unemployment rate among tribal members is more than double that of the nation. Household income is 31 percent lower. This makes the development and operation of affordable housing more difficult, particularly without subsidies.
  • There are over 2,000 LIHTC properties in Indian Areas supporting over 80,000 units. However, this is an overestimate of the tribal LIHTC stock because not all properties that fall within the boundaries of Indian Areas specifically focus on serving tribal members.
  • The unique definition of Indian Areas makes it difficult to precisely measure demographic, economic and housing characteristics.
  • Despite these challenges, tribal housing authorities successfully develop LIHTC housing in Indian Areas each year, though the rate of development is too slow to close the gap in housing over the near or moderate term.

 

 

NLIHC Publishes Report on Year 30 LIHTC Properties

The National Low Income Housing Coalition and the Public and Affordable Housing Research Corporation have published the new report “Balancing Priorities: Preservation and Neighborhood Opportunity in the Low-Income Housing Tax Credit Program Beyond Year 30.”  The report looks at preservation challenges relating to LIHTC properties as they reach the end of their initial use restrictions.  “By 2030, nearly half a million current LIHTC units, or nearly a quarter of the total stock will reach the end of all federally mandated rent-affordability and income restrictions. Some of these units will be lost from the affordable housing supply as they convert to market-rate rents. Others may be lost to physical deterioration unless new capital investment is available for rehabilitation and renovation. This report sheds light on these preservation challenges with an examination of the neighborhood characteristics of these LIHTC units and a discussion of how scarce resources for affordable housing lead to a dilemma between the priorities of preserving affordable housing and promoting mobility for low-income families to higher-opportunity neighborhoods. The report addresses this dilemma by offering a broader vision for a housing safety net.”

The report is based on data from the National Housing Preservation Database (NHPD) and other sources. The NHPD is a national database of federally assisted rental housing, which includes properties subsidized through HUD, USDA, and LIHTC. The NHPD gives stakeholders information on when and where affordability restrictions will expire. To learn more about the database, go to https://preservationdatabase.org/about-the-database/.

AHIC Updates LIHTC Underwriting Guidelines

The Affordable Housing Investors Council (AHIC) has published updated Underwriting Guidelines for its members.  The Guidelines are designed to be used as an outline for an underwriting process and for investment documents for proprietary, multi-investor, and direct investments in low-income housing tax credits (LIHTC). They examine how to analyze the financial strength and expertise of the development team; the key points to understand the sources and uses in the development budget; critical facets of underwriting the deal; best practices in due diligence; and tools for reviewing the capacity of syndicators.

NH&RA is pleased to see that once again, AHIC Underwriting Guidelines cite our affiliate, the National Council of Housing Market Analysts Model Content Standards in the market study portion of its Underwriting Guidelines.  Click here to download the Underwriting Guidelines.

Massachusetts Proposes Income Averaging Policy

The Massachusetts Department of Housing and Community Development has issued the proposed guidance on the new income averaging election for the Low Income Housing Tax Credit program.  The Department will hold several information sessions on income averaging over the next month. Given the many uncertainties associated with IA, at this time DHCD will only contemplate approval of IA as the basis for threshold eligibility under Section 42(g)(1) of the Code under the circumstances set forth below.

Projects in Which Income Averaging May be Used; Timing

Use of income averaging requires DHCD consent. DHCD currently contemplates limited use of income averaging, primarily in 4% preservation projects, where income averaging may help avoid displacement of residents whose incomes would not otherwise allow them to qualify for LIHTC units. In other contexts, income averaging presents much more complex legal and policy issues, particularly in the absence of implementing Federal regulations. This is particularly true in the context of 9% credits. Accordingly, at this time, DHCD will only contemplate approval of income averaging as the basis under which a project may qualify as a “qualified low-income housing project” under Section 42(g)(1)(C) of the Act in the following circumstances:

  1. The project has received a commitment of tax-exempt bonds from MassHousing or MassDevelopment and has sought an allocation of federal 4% credit from DHCD under the 2018-19 (or later) Qualified Allocation Plan;
  2. The project is either:
    a. A preservation project where income averaging will help avoid displacement of existing tenants while maximizing use of federal LIHTC, or
    b. A preservation or production project with a workforce housing tier, where there is a material difference between market rents and restricted rents at the 80% AMI level and where the applicant can demonstrate that income averaging is essential to project feasibility;
  3. The project has not yet received its 42(m) tax credit eligibility determination letter;
  4. The project has not yet made a minimum set-aside election on Form 8609 as to the threshold
    eligibility test applicable to the project under Section 42(g)(1) of the Code;
  5. The project has not yet been placed in service; and
  6. The project does not involve a resyndication of a property previously developed or preserved using LIHTC that is subject to an existing extended use agreement (EUA), if the proposed IA would conflict with the existing EUA minimum set-aside requirements. In general, a resyndication application will only qualify if:
    a. The project has completed its extended use period, or
    b. Fewer than 100% of the units in the project were LIHTC units and only the non-LIHTC units are proposed to be designated as over-60% AMI units.

DHCD will continue to evaluate the appropriateness of applying IA in other contexts, including projects with 9% credits; however, such projects are not eligible to utilize IA at this time.  Projects will also have to meet all federal threshold requirements (these are summarized in the guidance) as well as the following additional threshold requirements as set out by DHCD:

  • DHCD will allow up to four of the following AMI designations to be selected at a property utilizing IA: 30%, 50%, 60% and 80%.
  • Consistent with the QAP, a property must reserve at least ten percent of its total units for persons or families earning no more than 30% of AMI. Accordingly, each property seeking to utilize IA must at least satisfy the QAP requirements for ELI units.
  • Projects with fewer than 60 units will not be approved for IA absent compelling circumstances. While DHCD will examine requests on a case-by-case basis, the following are examples of reasons why DHCD would contemplate IA at a project with fewer than 60 units:
    o A project has several current tenants with incomes between 60% – 80% AMI in a location where there is a substantial disparity between rents at 80% AMI and market rents;
    o A project has an existing, project-based rental assistance contract that will be renewed for an extended period at the time of financial closing, facilitating marketing and rent-up of units notwithstanding the added complexity associated with having multiple income tiers within the affordable units; or
    o A scattered site development includes over-income tenants, and use of IA will enable the project to satisfy IRS audit guide requirements that 100% of units are both income and rent restricted.
  • In general, the proposal must create additional LIHTC units AND allow for a reduction in use of scarce State resources (e.g., funding from DHCD or another state or quasi-public agency).
  • If the project will receive any deferred-payment loans from either DHCD or MassHousing, the applicant must demonstrate that income averaging will generate additional equity, resulting in a reduction in the aggregate amount of state-funded deferred-payment loans. o A portion of any additional equity must be applied to reduce the amount of deferred-payment loans to be provided by state agencies.
    o In addition, DHCD will require mandatory payments from project cash flow, to be applied to reduce the amount of state deferred payment loans.
    o In no event will DHCD approve an increased development fee as a result of income averaging.

DHCD Additional Criteria Governing Consideration of Income Averaging Proposals

  •  All projects must satisfy all criteria applicable to projects generally under the QAP and Federal law.
  • DHCD will review requests for use of IA on a case-by-case basis, to assess the impact on project feasibility as well as potential benefits to current tenant households with incomes greater than 60% AMI.
  • Clear skewing of unit designations is not allowed. Applicants must demonstrate that units at different income tiers will be equitably distributed across the project and among bedroom sizes and unit types.
  • Additional documents will be required for for submission to DHCD, which are outlined further in the notice.