How & WhyProject-Based Vouchers

Eva Tafoya, Program Analyst, OPH, HUDTerry Barnard, Tax Credit Officer, CHFA

Lori Rosendahl, C.O.O., GJHA

Project-Based VouchersHUD 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

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Ref: 24 C.F.R. §§ 983.5-.6, 983.51, 983.56-.57, 983.251-259, 983.261

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

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Ref: 77 Fed. Reg. 28742 (May 15, 2012)

HUD Denver Office of Public Housing

Existing Housing Process

CompetitionHUD Review

(if PHA-owned)

Inspection 1

SelectionEnvironmental Review

Determination of Rent

Inspection 2 HAP Contract Occupancy

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HUD Denver Office of Public Housing

New Construction/Rehabilitated Process

CompetitionHUD Review

(if PHA-owned)

Selection Environmental Review

Subsidy Layering Review

Agreement to Enter

HAP

Construction

Determination of Rent

Inspection HAP Contract Occupancy

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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

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Ref: 24 C.F.R. § 983.3; 77 Fed. Reg. 28742 (May 15, 2012)

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

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Ref: 24 C.F.R. § 983.51

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)9

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”

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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

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

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Ref: 24 C.F.R. § 983.3

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)

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Ref: 24 C.F.R. § 983.51(e)

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

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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

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

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Ref: PIH Notice 2011-50

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

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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

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

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Ref: 24 C.F.R. §§ 983.3, 983.58, 983.151-.156; AHAP, HUD-52531A & B

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

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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

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

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Ref: 24 C.F.R. § 983.154-.156; AHAP Part 2, HUD-52531B

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

occupancyRef: 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

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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

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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

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

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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

Changes During HAP Contract

Ownership Modernization Contract units Rent

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Ref: 42 U.S.C. § 1437f(o)(13)(H)-(I), (K); 24 C.F.R. §§ 983.206-.207, 983.254, 983.301-.303

Project-Based VouchersCHFA 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 OverheadNumber of units w/ identity of

interestw/o identity of interest

75 units + 6% 8%

31-74 units 8% 10%

30 units or less 10% 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 VouchersPHA 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