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The Low Income Housing Tax Credit Program © 2015 Travois
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 © 2015 Travois
Travois Experience $1 Billion since 1995
Ft. Peck Homes II - MT © 2015 Travois
White Earth Homes - MN © 2015 Travois
Colville Homes II - WA © 2015 Travois
Lac Courte Oreilles II - WI © 2015 Travois
Reduce Waiting Lists
Opportunity to build equity © 2015 Travois Yavapai — Tunlii Subdivision 30 units Quinault — 35-single family units
Non-traditional student needs © 2014 Travois 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
Design Considerations © 2015 Travois Ft. Peck Homes II, Montana
Improve energy efficiency © 2015 Travois Shoulder Blade Complex — Northern Cheyenne solar array
Build Your Community © 2015 Travois
Developed by Congress in 1986 to finance the development of affordable rental housing for low- income households Administered by the Treasury Department (IRS) Section 42 of the Internal Revenue Code (IRC) defines the LIHTC Program The Low Income Housing Tax Credit Program © 2015 Travois
How does LIHTC work? © 2015 Travois IRS program administered by each state Encourages private investment in affordable housing Competitive process 15-year minimum rental program
How does LIHTC work? © 2015 Travois Can provide around 80% of the funding for the development Funding comes from investor equity and does not need to be paid back
What populations can be served? Family/Elderly Homeowners/ Renters Low Income/Extre mely Low Income Disabled and Other Special Needs Workforce/St udents ©2015 Travois
Tax Credit Terminology ©2015 Travois 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.
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. LIHTC program requirements ©2015 Travois
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 LIHTC Program Requirements © 2015 Travois
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 15- year compliance period – The tribe or TDHE determines the sales price and terms of the sale LIHTC program requirements ©2015 Travois
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. How are credits allocated? ©2015 Travois
Ownership Structure Tax Credits Hawaii Limited Partnership General Partner Developer 0.01% interest Full managerial control Limited Partner Investor* 99.99% interest No managerial control © 2015 Travois
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 http://www.huduser.org/QCT2013/qctma p.html © 2014 Travois
Hawaii’s QCTs © 2014 Travois
Hawaii’s DDAs © 2014 Travois Hawaii County Honolulu County Kalawao County Kauai County Maui County
© 2014 Travois Calculating Investor Equity (cont’d)
Calculating Developer’s Contribution Total Development Cost Less Investor Equity = Upfront Contribution Less Developer’s Fee* Less Acquisition Fee = Net Contribution** © 2014 Travois
Calculating Developer’s Contribution (cont’d) © 2014 Travois
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 © 2014 Travois
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 © 2014 Travois
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. © 2014 Travois
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) –3 rd party Capital Needs Assessment (for acquisition) © 2014 Travois
How do you get LIHTCs? HHFDC’s QAP (cont’d) © 2014 Travois
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 © 2014 Travois
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 © 2014 Travois
How do you get LIHTCs? HHFDC’s QAP (cont’d) Scoring Criteria #3 – Limiting Developer Fee (0-8 pts) © 2014 Travois
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) © 2014 Travois
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 © 2014 Travois
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) © 2014 Travois
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 © 2014 Travois
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 © 2014 Travois
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) © 2014 Travois
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) © 2014 Travois
Fees –Application Fee = $1,500 –Good Faith Deposit at allocation = 10% of credits reserved (60% refund) –Compliance Monitoring Fee © 2014 Travois How do you get LIHTCs? HHFDC’s QAP (cont’d)
What happens once you have LIHTCs? © 2014 Travois
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 © 2014 Travois
What happens during construction? © 2014 Travois
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! © 2014 Travois
What happens after construction is complete? © 2014 Travois
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 © 2014 Travois
Preserving the LIHTC Allocation: Ongoing Compliance © 2014 Travois
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 © 2014 Travois
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. © 2014 Travois Ongoing Compliance (cont’d)
What Happens at Year 15 and Beyond? © 2014 Travois
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 © 2014 Travois
Opportunity to Learn More… © 2015 Travois Travois 15 th Annual Indian Country Affordable Housing & Economic Development Conference September 21-23, 2015 Le Meridian Hotel New Orleans, LA
© 2015 Travois Tulalip Homes II family – Tulalip, Wash. Safe & affordable homes for families
For more information: © 2015 Travois Elizabeth Glynn Chief Operating Officer 816.979.3208 firstname.lastname@example.org www.travois.com
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