Transcript Grove Hall Gateway: Affordable Housing Recommendations

Grove Hall Gateway:
Affordable Housing Recommendations
Information Officer: Yili Tang
Staff:
Julie Huss
Russell Tipper
Qualified Affordable Housing Zones
Roxbury Market Comparables
Project Name
% Low Income
% Moderate Income
% Market Rate
BHP Dixwell III/Infill
74
0
26
Cass House
55
45
0
Cleaves Court Apts.
25
75
0
Crawford House
100
0
0
VBC Apts.
60
0
40
Washington Heights
78
0
22
Grant Manor
85
0
15
Park Hill Apts.
100
0
0
Prang Estates
41
0
59
Roxbury Corners
100
0
0
Camfield Gardens
28
0
72
Smith House
50
26
24
Affordable Housing Options

Section 8
– Government (federal) subsidized housing
vouchers

Section 42
– Government (state) subsidized tax credits
Section 8

Authorized by Congress in 1974 and developed by HUD to provide rental subsidies for
eligible tenant families residing in newly constructed, rehabilitated and existing rental and
cooperative apartment projects.
 Eligibility:
–
Must be a family (including single persons)
– Must be income eligible (income limits set by the Department of Housing and Urban Development)
– Must be U.S. citizen or have eligible immigration status.

Owner obligations:
–
–
–
–
–

(i) the leasing of assisted units to Section 8 income eligible families,
(ii) the maintenance of the project as decent, safe and sanitary housing for the residents,
(iii) compliance with applicable nondiscrimination and equal employment opportunity requirements,
(iv) compliance with Section 8 reporting, management and accounting requirements, and
(v) the procurement of the prior written approval of HUD and the Contract Administrator to any
transfers of the project or any portion thereof and any assignment of the HAP Contract.
Rents:
–
The tenant then pays 30% of household income for rent, with the balance paid by the housing
authority directly to the landlord.
Section 8 Rent & Income Limitations
Rent Limit
50% of Median Income
Efficiency
$
648.00
1 Bedroom
$
698.00
2 Bedroom
$
835.00
3 Bedroom
$
964.00
4 Bedroom
$
1,076.00
5 Bedroom
$
1,186.00
Income Limits
50% of Median Income
1 Person
$
25,950.00
2 Person
$
29,700.00
3 Person
$
33,400.00
4 Person
$
37,100.00
5 Person
$
40,050.00
6 Person
$
43,050.00
7 Person
$
46,000.00
8 Person
$
48,950.00
The rent and income limits shown above are derived from the HUD 50% Area Median Gross Income units in
accordance with Revenue Ruling 89-24. All final calculations are rounded down to the nearest whole dollar.
Section 42

In 1986, Congress enacted the Low Income Housing Tax Credit (refer to as the “Housing
Credit” in the paper) Program which is authorized and governed by Section 42 of the Internal
Revenue Code of 1986.

Income Restriction:
–


The entire development must meet the minimum set-aside test in order to be eligible for the Housing
Credit. By doing so, it could ensure that certain number of apartment units will be available to lowincome households.
Minimum set-aside (Section 42(g))
–
20%@50% - 20% or more of the aggregate residential rental unites are occupied by individuals with
incomes of 50% or less of area median income, as adjusted for family size (the 20-50 set aside test),
or
–
40%@60% - 40% or more of the aggregate residential rental units are occupied by individuals with
incomes of 60% or less of area median income, as adjusted for family size, (the 40-60 set aside test)
Rents:
–
The gross rent charged to a qualified tenant could not exceed 30% of the annual imputed income
applicable to such rental unit.
Section 42 (cont.)

Type of Credit:
–
The maximum Housing Credit allocated to owners of qualified low-income projects is equal to
–
40% of the qualified development cost (30% on a present value basis) for projects which have
qualified acquisition costs or the benefit of a federal subsidy, such as HUD loan or tax-exempt bond
financing (the “4% credit”)
–
90% of the qualified development cost (70% on a present value basis) for projects which are
financed without a federal subsidy (the “9% credit”).
Calculation of Maximum Housing Credit Award
Total Development Cost
$4,500,000
Less: Land, Working Capital and Other Ineligible costs
(500,000)
Eligible Housing Credit Basis
% of Qualified Units
4,000,000
x
Qualified Housing Credit Basis
Applicable Annual Housing Credit Rate
Annual Housing Credits
20%
800,000
x
4%
$32,000
Section 42 Rent Restriction
the 20-50 set aside test
the 40-60 set aside test
Annual area median income
$30,000
50% of annual area median income
Annual area median income
15,000
60% of annual area median income
60% of monthly median income
(/12)
(*.30)
50% of monthly median income
(/12)
1, 250
30% of maximum monthly income
(*.30)
375
30% of maximum monthly income
(50)
Less: monthly utility allowance
Less: monthly utility allowance
Maximum allowable rent
$30,000
$325
Maximum allowable rent
18,000
1,500
450
(50)
$400
Assume, for instance, a Housing Credit Project which elects to set aside a minimum of 20% or 40%of its units for qualifying households. Assume further that the
2002 median income for a family in the Roxbury area in which a property was built is $30,000 and that the tenant must pay their own utility bills which are estimated
to be $50 per month.
Comparing Section 42 & 8
Section 42
Administrated
State Housing Credit
by
Agency
Maximum
60% of area median
family income
income
Minimum family
0% of area median
income
income
Rent restriction
30% of area median
income
Lock-in Period
30 years
Profit realized
D evelopment process
from
Ability to
Limited
generate N OI
Investment
Fixed at inception
return
Section 8 Vouchers
Federal (HUD )
50% of area median
income
0% of area median
income
Market rent
N /A
Operation process
Strong
Varies w ith market
situation
Recommendations
Agree with Grove Hall Gateway’s recommendation in using Section 42 instead of Section 8
 We would recommend the affordable housing units to exceed 20%
 Maximize affordable housing credits to offset tax liabilities.
 Rationale:

–
–
–
–
–

Investment return in fixed/known at onset of project.
Ability to capture a greater percentage of the low-income family demand due to a larger percentage
of median income to qualify (60% vs. 50%).
Tax Credits can be used to offset future federal tax liabilities.
Section 8 properties tend to aggregate large numbers of unemployed families, defeating the goal of
mixed-income housing.
Section 42 is a more stable environment for families moving to self sufficiency.
Difficulties:
–
Section 8 does not require a lock-in period unlike Section 42’s 30-year lock-in period.

–
Much longer than what we project it will take to gentrify the community
No rental guarantee, Section 42 can default on rent unlike Section 8 which has a portion backed by
HUD.