Transcript Hawaii LIHTC Intro presentation

The Low Income Housing Tax
Credit Program
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Introduction
 Travois was established in 1995
 Headquartered in Kansas City, Missouri
 Mission-driven company
 30 Full Time Employees
 Specialize in Affordable Housing & Economic
Development in Indigenous Communities
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Travois Experience
$1 Billion since 1995
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Ft. Peck Homes II - MT
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White Earth Homes - MN
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Colville Homes II - WA
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Lac Courte Oreilles II - WI
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Reduce Waiting Lists
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Opportunity to build equity
Yavapai — Tunlii
Subdivision
30 units
Quinault —
35-single
family units
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Non-traditional student needs
Sitting Bull College –
Standing Rock
Sioux Tribe,
Ft. Yates, ND
18 single-family units
United Tribes
Technical
College –
Bismarck, ND
24 apartment units
Little Priest Tribal College –
Winnebago Tribe, Nebraska
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Design Considerations
Ft. Peck Homes II, Montana
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Improve energy efficiency
Shoulder
Blade
Complex —
Northern
Cheyenne
solar array
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Build Your Community
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The Low Income Housing Tax
Credit Program
• Developed by Congress in
1986 to finance the
development of affordable
rental housing for lowincome households
• Administered by the
Treasury Department (IRS)
• Section 42 of the Internal
Revenue Code (IRC) defines
the LIHTC Program
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How does LIHTC work?
• IRS program administered by each
state
• Encourages private investment in
affordable housing
• Competitive process
• 15-year minimum rental program
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How does LIHTC work?
• Can provide around 80% of the
funding for the development
• Funding comes from investor equity
and does not need to be paid back
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What populations can be served?
• Family/Elderly
• Homeowners/
Renters
• Low
Income/Extre
mely Low
Income
• Disabled and
Other Special
Needs
• Workforce/St
udents
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Tax Credit Terminology
LIHTC – Low Income Housing
Tax Credit
QAP – Qualified Allocation Plan
Carryover – Information the
state requires to ensure project is
making progress
Developer’s Fee – Fee earned
by Tribe for working on project.
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LIHTC program requirements
• Mandatory income and rent restrictions
– Federal maximum income – 60% AMI
– Rents are based on Area Median Income plus utility
costs
• Incomes must be certified at move-in but income increases
do not affect eligibility
– In other words, if incomes increase after the initial
certification, the tenant does not have to move out of
the unit.
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LIHTC Program Requirements
• Mandatory income and rent restrictions
• Federal maximum income – 60% AMI
• States offer preferences to lower levels
– 30% - 50% AMI
• Rents are based on Area Median
Income plus utility costs
• Initial 15 year mandatory compliance
period
• 15 year extended use period
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LIHTC program requirements
• Compliance periods
– 15-year mandatory compliance period
– 15-year extended use period
– Some states give preferences to longer compliance
periods
• Sec. 42 has provisions for Lease-Purchase
– Allows tenants to purchase homes after the initial 15year compliance period
– The tribe or TDHE determines the sales price and terms
of the sale
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How are credits allocated?
• The IRS allocates credits to individual states (based on
population), who are then responsible for allocating
credits to qualified projects.
• States must develop a QAP (Qualified Allocation Plan) for
allocating credits.
• Eligibility is based on meeting the requirements in both
Section 42 and your state’s QAP.
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Ownership Structure
Tax Credits
Hawaii Limited Partnership
General Partner
Limited Partner
Developer
Investor*
0.01% interest
Full managerial
control
99.99% interest
No managerial control
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How are LIHTCs calculated?
• 30% Basis Boost for projects located in
QCTs or DDAs
– Qualified Census Tracts (QCTs):
• tracts where 50% or more of households have
income less than 60% of AMI
OR
• tracts with poverty rate of 25%
– Difficult Development Areas (DDAs):
• areas designated by HUD as having high
construction, land and utility costs relative to area
median income
• http://www.huduser.org/QCT2013/qctma
p.html
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Hawaii’s QCTs
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Hawaii’s DDAs
•
•
•
•
•
Hawaii County
Honolulu County
Kalawao County
Kauai County
Maui County
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Calculating Investor Equity (cont’d)
45-unit New Construction Project
Total Development Cost
Less ineligible costs
Eligible Basis
x Basis Boost
Total Eligible Basis
x Applicable Fraction
Qualified Basis
x Applicable Percentage
Tax Credits
$7,500,000
$220,000
$7,280,000
130%
$9,464,000
95%
$8,990,800
7.64%
$686,897
Investor Pricing
Total Investor Equity
$0.86
$5,906,725
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Calculating Developer’s Contribution
Total Development Cost
Less Investor Equity
= Upfront Contribution
Less Developer’s Fee*
Less Acquisition Fee
= Net Contribution**
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Calculating Developer’s Contribution
(cont’d)
45-unit New Construction Project
Total Development Cost
Less Investor Equity
Upfront Contribution
Less Developer's Fee
Net Contribution
$7,500,000
$5,906,725
$1,593,275
$850,000
$743,275
Net Contribution per unit
$16,517
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How do you get LIHTCs?
• Apply to State Allocating Agency
–Hawaiian Housing Finance &
Development Corporation
• Meet Requirements of Qualified
Allocation Plan (QAP)
• Credits awarded based on what’s
feasible for project
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How do you get LIHTCs? (cont’d)
• Section 42 Preferences:
– Projects serving the lowest income tenants
– Projects serving tenants for the longest periods
– Projects located in QCTs and contribute to a community
revitalization plan
• Section 42 Selection Criteria:
–
–
–
–
–
–
–
–
Project location
Housing needs characteristics
Project characteristics
Sponsor characteristics
Special needs populations
Waiting lists
Populations of individuals with children
Projects intended for tenant ownership
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How do you get LIHTCs? (cont’d)
• Section 42 changes in NAHASDA
Reauthorization Bill
– Adds as a preference projects located in Indian Areas
developed by a Tribe/TDHE
– Adds as a selection criteria projects located in Indian
Areas
– Adds new section requiring states to:
• to award tribal projects points in an amount not less than
10% of the total points available to applicants, and
• to not penalize tribal projects based on location to
population centers, public transportation systems or
publicly available amenities.
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Applications due January/February
• Threshold Requirements
–Market Study within 6 months
–Site Control (lease/option
agreement/fee simple deed, etc)
–3rd party Capital Needs Assessment
(for acquisition)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #1 = Ratio of credits
requested to low-income units (0-20 pts)
• 2010-2012
– lowest ranged from $5,630 – $13,855
– mid ranged from $9,723 – $22,798
– highest $14,912 – $29,568
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #2 = Overall project
feasibility (0-20 pts)
– reasonableness of development costs
– financing structure and operating expense
feasibility
– readiness to proceed (zoning, utility
availability)
– adequate reserves
– services/amenities
– adequate project contingencies
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #3 – Limiting Developer
Fee (0-8 pts)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #4 – project receives
project-based rental assistance
subsidies for first time where tenants
would pay 30% of monthly income
towards rent (0-8 pts)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #5 – Local Government
Support (0-8 pts)
– permanent below market loan/lease/sale of
property from state or local government
agency
– 2 points if applied for support
– 5 points if received commitment for support <
10% of TDC
– 8 points if received commitment for support
>10% of TDC
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #6 – Energy Efficiency &
Green Building (0-8 pts)
• Scoring Criteria #7 – Project Location &
Market Demand (0-8 pts)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #8 – Developer
Experience (0-8 pts)
• Scoring Criteria #9 - Longer Extended
Use Period (0-6 pts)
– all project awarded credits 2010-2012 committed to 61 years
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #10 – Tenant
Populations (0-6 pts)
– elderly or households with families
• Scoring Criteria #11 – Special Needs
Populations (0-6 pts)
– must provide free services
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #12 – Tax Credits
requested/total low-income units (0-4 pts)
• Scoring Criteria #13 – Lower Income
Targeting (0-4 pts)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Scoring Criteria #14 – Project sponsored by a
qualified non-profit (0-3 pts)
• Scoring Criteria #15 – Low-income public
housing waiting list (0-1 pt)
• Scoring Criteria #16 – Homeownership (0-1 pt)
• Scoring Criteria #17 – QCT & Community
Revitalization Plan (0-1 pt)
• Scoring Criteria #18 – Historic Nature (0-1 pt)
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How do you get LIHTCs?
HHFDC’s QAP (cont’d)
• Fees
– Application Fee = $1,500
– Good Faith Deposit at allocation = 10% of credits
reserved (60% refund)
– Compliance Monitoring Fee
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What happens once you have
LIHTCs?
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What happens once you have
LIHTCs?
• Solicit Investor Offers & Make
Selection
• Finalize A&E Plans, Put out to Bid,
Select Contractor
• Partnership Closing
–satisfy investor’s due diligence
checklist
–2-4 month process
–many parties involved
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What happens during
construction?
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What happens during
construction?
• Monthly Work-in-Place Reviews
• Monthly Draw Requests of
Investor’s Equity when eligible
• Certificates of Occupancy issued as
each unit is Placed In Service
• Credits are earned as buildings are
placed in service
–meeting construction schedule agreed
on in LPA is crucial!
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What happens after
construction is complete?
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What happens after construction
is complete?
• Contractor Close Out
• Apply for Final Allocation to HHFDC
(Forms 8609)
• Enter into Land Use Restriction
Agreement (“LURA”)
• Earn Developer Fee
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Preserving the LIHTC
Allocation:
Ongoing Compliance
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Ongoing Compliance
• Management company training
• $25/unit compliance monitoring
fee
• Initial certification & annual
recertifications of qualified tenants
• LIHTC Annual Report
• HHFDC audit every three years
• 8823 issued for noncompliance
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Ongoing Compliance (cont’d)
• You are at risk of losing credits if you do
one of the following things:
–
–
–
–
Negligence or fraud in determining eligibility
Maintenance and management neglect
Loss of units due to fire or tenant abuse
Failure to meet carryover requirements
• Risks mitigated by paying attention to
project requirements, compliance
monitoring and by establishing quality
management procedures.
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What Happens at Year 15 and
Beyond?
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Year 15 and Beyond
• Investor Exits Partnership
• Resyndication
• Owner Can Request Qualified Contract
if right hasn’t been waived
– HHFDC advertises project at Qualified
Contract Price
– If no prospective buyer in 1 year, 15-year
extended use period terminated and
converted to market rate over 3 years
• Conversion to Homeownership
• HHFDC’s reporting to IRS ends
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Opportunity to Learn More…
Travois 15th Annual Indian Country
Affordable Housing & Economic
Development Conference
September 21-23, 2015
Le Meridian Hotel
New Orleans, LA
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Safe & affordable homes for families
Tulalip Homes II family – Tulalip, Wash.
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For more information:
Elizabeth Glynn
Chief Operating Officer
816.979.3208
[email protected]
www.travois.com
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