We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byKassandra Semar
Modified over 2 years ago
The Low Income Housing Tax Credit Program© 2015 Travois
Introduction Travois was established in 1995Headquartered 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 © 2015 Travois
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 © 2015Travois
Opportunity to build equityYavapai — Tunlii Subdivision 30 units Quinault — 35-single family units © 2015 Travois
Non-traditional student needsSitting 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 © 2014 Travois
Design ConsiderationsFt. Peck Homes II, Montana © 2015 Travois
Improve energy efficiencyShoulder Blade Complex — Northern Cheyenne solar array © 2015 Travois
Build Your Community © 2015 Travois
The Low Income Housing Tax Credit ProgramDeveloped 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 © 2015 Travois
How does LIHTC work? IRS program administered by each stateEncourages private investment in affordable housing Competitive process 15-year minimum rental program © 2015 Travois
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 © 2015 Travois
What populations can be served?Family/Elderly Homeowners/Renters Low Income/Extremely Low Income Disabled and Other Special Needs Workforce/Students ©2015 Travois
Tax Credit TerminologyLIHTC – 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. ©2015 Travois
LIHTC program requirementsMandatory 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. ©2015 Travois
LIHTC Program RequirementsMandatory 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 © 2015 Travois
LIHTC program requirementsCompliance 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 ©2015 Travois
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. ©2015 Travois
Ownership Structure Tax Credits Hawaii Limited Partnership*initial LP as placeholder; Investor does not join partnership until it purchases the LP interest at closing 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 * some states award less than 30% boost © 2014 Travois
Hawaii’s QCTs © 2014 Travois
Hawaii’s DDAs Hawaii County Honolulu County Kalawao CountyKauai County Maui County © 2014 Travois
Calculating Investor Equity (cont’d)© 2014 Travois
Calculating Developer’s ContributionTotal Development Cost Less Investor Equity = Upfront Contribution Less Developer’s Fee* Less Acquisition Fee = Net Contribution** *earned three months after occupancy **soft-debt from NAHASDA © 2014 Travois
Calculating Developer’s Contribution (cont’d)© 2014 Travois
How do you get LIHTCs? Apply to State Allocating AgencyHawaiian 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 IRS gives states latitude to create scoring criteria in their QAP that must give preferences to Section 42(m)(1)(B)(ii) and can be based on Section 42(m)(1)(C) selection criteria. © 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) 3rd party Capital Needs Assessment (for acquisition) © 2014 Travois
How do you get LIHTCs? HHFDC’s QAP (cont’d)yellow = preferences green = selection criteria © 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) 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 development costs – about same on HHL as on non HHL? as compared to cost to construct on reservations zoning – DHHL has zoning authority? © 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) include HAP? © 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 loan to partnership & long term land lease © 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 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) homeownership mutually exclusive with extended use period points? CRP = NHHP © 2014 Travois
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 homeownership mutually exclusive with extended use period points? CRP = NHHP © 2014 Travois
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
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. Should I give a total of our staff for development? Asset Management? Design & Inspections? Should I mention here the roles of the Tribe? How we do not interfere with their operations… © 2014 Travois
What Happens at Year 15 and Beyond?© 2014 Travois
Year 15 and Beyond Investor Exits Partnership ResyndicationOwner 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 non-profit GP purchases LP’s interest for debt + taxes (shouldn’t be any taxes) so just assume debt for-profit GP = greater of FMV or debt + taxes for the acquisition of the property by a prospective buyer that agrees to purchase the property for the “qualified contract price”1. If the state agency is not able to find a buyer to purchase the building at the “qualified contract price”, the additional use period is terminated. The QC Application shall include the Owner’s proposed QC price. The QC Application shall include a report calculating the QC price prepared by an independent certified public accountant (“QC Report”) © 2014 Travois
Opportunity to Learn More…Travois 15th Annual Indian Country Affordable Housing & Economic Development Conference September 21-23, 2015 Le Meridian Hotel New Orleans, LA © 2015 Travois
Safe & affordable homes for familiesTulalip Homes II family – Tulalip, Wash. © 2015 Travois
Chief Operating OfficerFor more information: Elizabeth Glynn Chief Operating Officer © 2015 Travois
The Low Income Housing Tax Credit Program
How to Finance Affordable Housing with Low Income Housing Tax Credits July 10, 2007.
Nebraska Investment Finance Authority © 2007 Tax Credit Basics.
Virginia Housing Coalition 2013 Housing Credit Conference Deal Structuring, Fundamentals, and Financing and Legal Issues.
LOW-INCOME HOUSING TAX CREDITS
HOME INVESTMENT PARTNERSHIPS PROGRAM 24 CFR Part 92.
Overview of the Housing Tax Credit Program 2015 Nebraska NAHRO Conference.
HOUSING TAX CREDITS COMPLIANCE MATTERS SONIA A. NAYAK NOVEMBER 1, 2007.
Nebraska Investment Finance Authority © 2005 Tax Credit Basics.
Tax Credit Basics Nebraska Investment Finance Authority.
Utah Housing Corporation Low-Income Housing Tax Credit Program Presentation By W. Robin Kemker LIHTC Technical Specialist Utah Housing Corporation.
A Brief Description of the Low Income Housing Tax Credit.
Wyoming Community Development Authority Financing Affordable Housing in Wyoming Housing Trust Fund (HTF) Public Hearing June 9, 2016 State of Wyoming Citizen.
INDIAN COMMUNITY DEVELOPMENT BLOCK GRANT WHAT IS AN INDIAN COMMUNITY DEVELOPMENT BLOCK GRANT (ICDBG)? ICDBG is a grant program being offered by HUD’s.
The Complexity of Supportive Housing Carla B. Pope Director, Affordable Rental Production.
Beginner’s Guide to LIHTC
Began with Tax Reform Act of 1986; tax credits are now the primary vehicle for low-income rental housing construction and rehabilitation in the U.S.
1 George Mensah Director of Community & Economic Development Dept City of Miami Working with your developer.
Year 15: Nonprofit Transfer Strategies for Expiring LIHTC Properties Supportive Housing Network of New York May 5, 2009 Presenters: Gregory Griffin, Director,
Funding Opportunities Federal Home Loan Bank of Indianapolis.
© 2017 SlidePlayer.com Inc. All rights reserved.