Project-Based Vouchers How & Why Project-Based Vouchers Eva Tafoya, Program Analyst, OPH, HUD Terry Barnard, Tax Credit Officer, CHFA Lori Rosendahl, C.O.O., GJHA

Project-Based Vouchers HUD Regulations & Guidance Eva Tafoya, Program Analyst, OPH, HUD

HUD Denver Office of Public Housing PBV - HUD Long-term HAP contract with owner Assistance tied to unit, not participant Up to 20% of voucher budget authority Up to 25% of units within a project Excepted: elderly, disabled, supportive services Governed by 42 U.S.C. § 1437f(o)(13) and 24 C.F.R. Part 983 Administrative and Annual or 5-year Plans Ref: 24 C.F.R. §§ 983.5-.6, 983.51, 983.56-.57, 983.251-259, 983.261 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing Developments Housing and Economic Recovery Act of 2008 Proposed rule issued May 15, 2012 Proposed rule notes self-implementing changes Feb. 3, 2014 letter: no retroactive waivers PBV Guidebook: December 2014 Ref: 77 Fed. Reg. 28742 (May 15, 2012) HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Existing Housing Process Competition HUD Review (if PHA-owned) Inspection 1 Selection Environmental Review Determination of Rent Inspection 2 HAP Contract Occupancy HUD Denver Office of Public Housing HUD Denver Office of Public Housing

New Construction/Rehabilitated Process Competition HUD Review (if PHA-owned) Selection Environmental Review Subsidy Layering Review Agreement to Enter HAP Construction Determination of Rent Inspection HAP Contract Occupancy HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Existing, New, Rehabilitated Proposal selection date is key Existing: substantially complies with HQS Newly constructed: does not exist Rehabilitated: exists but does not substantially comply with HQS PBVs may not be awarded to properties in which construction has begun but before the units substantially comply with HQS Ref: 24 C.F.R. § 983.3; 77 Fed. Reg. 28742 (May 15, 2012) HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Competitive Selection Request for proposals Public notice Open to proposals from multiple sites Prior competition PBVs may not have been considered in prior competition Prior selection must have occurred within 3 years Administrative Plan sets selection criteria Ref: 24 C.F.R. § 983.51 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing Before Selection Date Units qualify for PBVs Within budget authority and project caps Not already under construction Eligible units under 24 C.F.R. §§ 983.53-.54 Compliant with civil rights law Meets site selection standards of 24 C.F.R. § 983.57 Review of selection process (PHA-owned) Existing housing only: Independent entity approval (PHA-owned) Substantially complies with HQS (24 C.F.R. § 983.52) HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Elderly-Only Properties May not discriminate based on familial status Must admit elderly families with children Units must have a 62 and older restriction to qualify as “excepted” Ref: 42 U.S.C. §§ 3607(b)(2), 1437a(b)(3)(B); 64 Fed. Reg. 16324 (Apr. 2, 1999) HUD Denver Office of Public Housing HUD Denver Office of Public Housing

PHA-Owned Units: Ownership Unit owned by the PHA administering the voucher program “PHA” means PHA or its officers, agents, or employees “Owned” means holding a direct or indirect interest in unit or in entity that owns the unit Titleholder or lessee Stockholder, member, or general or limited partner Member of a Limited Liability Corporation Ref: 24 C.F.R. § 983.3 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

PHA-Owned Units: Selection Review of selection process HUD Field Office HUD-approved independent entity Provide documentation (selection criteria, proposals) Ref: 24 C.F.R. § 983.51(e) HUD Denver Office of Public Housing HUD Denver Office of Public Housing

PHA-Owned Units: Rent and HQS HUD approves independent entity Independent entity’s duties: Set initial rents and contract term Conduct annual redetermination of rent Determine reasonable rent Perform HQS inspections Submit reports to HUD and PHA Appraisal required Ref: 42 U.S.C. § 1437f(o)(11), (13); 24 C.F.R. §§ 983.51, 983.59, 983.103, 983.303 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing VASH PBV Approval All VASH PBVs require HUD approval and VA partner support Complete selection requirements prior to seeking VASH PBV approval Includes HUD field office approval of PHA-owned selection Ref: PIH Notice 2011-50 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Demolition/Disposition Proceeds Proceeds generally reserved for provision of low-income housing Ensure PBVs are allowed before committing proceeds If not allowed, reserve units receiving proceeds for HCV families Do not steer HCV families to reserved units Ref: 42 U.S.C. § 1437p(a)(5)(B); 24 C.F.R. §§ 970.19, 982.352(b); PIH Notice 2012-7 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Agreement to Enter HAP (AHAP) Only applies to new construction and rehabilitated projects Sets plan for construction, rents, and timing Before AHAP execution: Environmental review Subsidy layering review Must be executed prior to the start of construction Ref: 24 C.F.R. §§ 983.3, 983.58, 983.151-.156; AHAP, HUD-52531A & B HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Subsidy Layering Review SLRs: certain new/rehabilitated projects Any other Federal, State or local housing assistance including tax credits PHA prepares SLR request CHFA may conduct if project has tax credits HUD conducts all other SLRs Ref: 42 U.S.C. § 1437f(o)(13)(M); 24 C.F.R. § 983.55; 75 Fed. Reg. 39561 (Jul. 9, 2010); PIH Notice 2013-11 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing Labor Standards Owner, contractor, subcontractor requirements: Employ low-income persons and program participants (Section 3) If developing 9+ units, pay Davis-Bacon wages Provide overtime and safe conditions Provide equal employment opportunity PHA may not enter HAP Contract if work did not comply with AHAP Ref: 24 C.F.R. § 983.154-.156; AHAP Part 2, HUD-52531B HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing HAP Contract Before HAP Contract execution: Environmental review (existing) Independent entity approval (PHA-owned new and rehabilitated projects) Units fully comply with HQS Initial rents set Lowest: 110% FMR, reasonable rent, or requested rent Maximum total term: 30 years Sign lease/tenancy addendum at occupancy Ref: 42 U.S.C. § 1437f(o)(13); 24 C.F.R. §§ 983.58, 983.103, 983.204, 983.256, 983.301; HAP, HUD-52530A, B, & C HUD Denver Office of Public Housing HUD Denver Office of Public Housing

HUD Denver Office of Public Housing Rent Calculation Payment standards do not apply Tenant rent = TTP – utility allowance Utility reimbursement = utility allowance – TTP HAP = rent to owner – tenant rent Ref: 42 U.S.C. §§ 1437f(o)(2)(C), 1437f(o)(13)(H); 24 C.F.R. §§ 983.351, 983.353 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Other Differences from HCV Waiting list/referral process Participants eligible for HCV after one year HQS: turnover and sample annually Different reporting in PIC 50058 and VMS Vacancy payments Ref: 42 U.S.C. § 1437f(o)(13)(E), (J), (K); 24 C.F.R. §§ 983.103, 983.251, 983.260, 983.352 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Changes During HAP Contract Ownership Modernization Contract units Rent Ref: 42 U.S.C. § 1437f(o)(13)(H)-(I), (K); 24 C.F.R. §§ 983.206-.207, 983.254, 983.301-.303 HUD Denver Office of Public Housing HUD Denver Office of Public Housing

Project-Based Vouchers CHFA Role Terry Barnard, Tax Credit Officer, CHFA

PBV - CHFA Subsidy Layering Review Review process to ensure that housing projects receiving HUD assistance do not receive excessive compensation by combining various forms of HUD program assistance (including PBVs) with assistance from other Federal, State, or local agencies. LIHTCs fall into the definition of “other” Government Assistance --Federal Register, July 9, 2010

PBV - CHFA Subsidy Layering Review Background Section 102(d) of Housing and Community Development Reform Act of 1989 -- HUD Secretary must limit assistance granted to a project to “…not be more than is necessary to provide affordable housing after taking account…(Other Government Assistance).” Section 911 of the Housing and Community Development Act of 1992 -- the requirements of 102(d) would be satisfied in connection with a project receiving assistance under a HUD program and under IRC Section 42 by certification of a housing credit agency.

PBV - CHFA Subsidy Layering Review Background (cont’d) Section 42 of the IRC -- authorizes LIHTC allocations to be administered by State or local housing credit agencies to encourage the development of housing for very low income tenants. Section 42 -- requires CHFA to ensure that, “The housing credit dollar amount allocated to a development shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the development and its viability as a qualified low-income housing development through the credit period.”

PBV - CHFA Subsidy Layering Review Background (cont’d) 1999 – CHFA began performing subsidy layering analyses on projects in which CHFA was the lender and HUD Housing Assistance was involved, primarily, the 542(c) Risk Share Mortgage Insurance program. >> 9 years HERA Act of 2008 made revisions to PBV program, including delegating SLRs for projects involving PBVs and LIHTCs to State or local agencies for new construction and rehabilitated projects.

PBV - CHFA Subsidy Layering Review Projects involving PBVs Administrative Guidelines for conducting SLRs contained in the Federal Register Notice of July 9, 2010 Guidelines required HCAs to submit Intent to Participate to HUD for conducting SLRs and HUD to acknowledge the HCA participation by posting the agency name on the PIH website. HUD required to conduct SLRs for projects that do not involve LIHTCs

PBV - CHFA Tasks and Duties of a SLR CHFA must consider the following: All sources and uses of funds The proceeds expected to be generated by the sale of tax credits The reasonableness of development and operational costs of the project The affect of operational support from the PBV subsidy to make the project feasible without overcompensation. Operational support analysis considers the debt service coverage ratio (DCR) and the amount of cash flow generated by the project.

PBV - CHFA Tasks and Duties of a SLR Generally, IRC Section 42 requires CHFA to make these determinations to ensure no more credit is being allocated than necessary to make the project financially feasible. The SLR guidelines of the Federal Register Notice of July 9, 2010 are considered to be fulfilled by the IRC Section 42 review as long as the Section 42 review substantially complies with the Notice requirements. CHFA’s LIHTC underwriting requirements, Contractor Overhead and Profit limits, and Developer Fee and Consultant Fee limits generally fulfill the requirements of both.

PBV - CHFA How CHFA conducts SLRs CHFA’s underwriting requirements for LIHTC projects are published annually in the Qualified Allocation Plan (QAP). CHFA’s underwriting standards and limits are as follows: Aggregate Builder’s Profit and Overhead Number of units w/ identity of interest w/o identity of interest 75 units + 6% 8% 31-74 units 10% 30 units or less 12% *percentages of hard construction costs, including new structures/rehab, onsite work, contingency, and accessory structures

PBV - CHFA How CHFA conducts SLRs (cont’d) Aggregate Developer Fee and Consultant Fee Limits Number of units Percent allowed 51 units or more 12% 50 units or less 15% *percentages are based on total project costs net of land, developer/consultant fee category, and reserves Vacancy rate minimum of 7% Rent and expense trending of 2% and 3% DCR minimum of 1.15 and maximum of 1.30

PBV - CHFA Forms and Process Subsidy Layering Checklist

PBV - CHFA Forms and Process Subsidy Layering Checklist Project Name, Location Housing Authority Narrative Description of Project, including: Total number of units Type of unit, bedroom distribution Portion and type of units receiving assistance, compliance with partial assistance requirements Sources of Funds – CHFA provides Development Financing worksheet from LIHTC application Uses of Funds – CHFA provides Development Budget worksheet from LIHTC application

PBV - CHFA Forms and Process Subsidy Layering Checklist (cont’d) Tax Credit Allocation Letter – CHFA provides Historic Tax Credits – Sponsor provides, if applicable Operating Proforma showing projected project income, expenses, and cash flow – CHFA provides Development Income, Development Expenses, and 15-Year Pro Forma worksheets from LIHTC application Standard Disclosure and Perjury Statement, Identity of Interest Statement – Sponsor provides Initial Contract Rents – Sponsor provides

PBV - CHFA Forms and Process Subsidy Layering Checklist (cont’d) Section 911 Certification letter – CHFA will provide letter to certify that: The project will be receiving tax credits The standards for General Conditions and Contractor Overhead are within approved processing allowances The standard for Builder Profit is within the applicable limit The standard for Developer Fee is within market limits The PBV assistance provided by HUD to the project is not more than necessary to provide affordable housing after taking into account other government assistance HUD Form 2880 – Applicant/Recipient Disclosure/Update Report – Sponsor provides

PBV - CHFA Forms and Process HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

PBV - CHFA HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

PBV - CHFA HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

PBV - CHFA HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

PBV - CHFA Forms and Process If excessive funds are found during the SLR, CHFA will reduce the amount of LIHTC award to balance the sources and uses CHFA sends complete SLR package to HUD PIH Office PHA may not provide PBV subsidy or enter into an AHAP prior to the completion of the SLR Once CHFA sends the package to HUD, the PHA may execute the AHAP

Project-Based Vouchers PHA Perspective Lori Rosendahl, C.O.O., GJHA

PBV – PHA GJHA Admin Plan for PBV How developed (Nan McKay?) Basic overview of competitive process GJHA Board and management considerations - new unit creation, rents less than FMR, special population needs Revisions based on PBV experience

PBV – PHA Process of working with PBV applicant How and when does GJHA commit AHAP vs HAP Timing and commitment issues Environmental – who completes Calculating 20% budget authority limit and balance with long-term PBV contracts (impacts small PHAs more significantly)

PBV – PHA PHA owned units Notification process to HUD Identification of independent entity Contract Costs Mechanics of HQS inspections, initial rent determination

PBV – PHA Overview of PBV HAP contracts implemented – strengths and weaknesses Special considerations Common Problem areas

Questions? Thank you