Low Income Housing Tax Credits & Preservation in Georgia, 2019

The Georgia Department of Community Affairs (DCA), in its 2019 Qualified Allocation Plan (QAP) estimates that approximately $25 million of federal credits will be available in the 2019 round.

The QAP describes general goals of;

  • Increasing access to thriving communities through outreach and development in areas of opportunity
  •   Partnering across Georgia to grow and achieve local visions for strong communities
  •   Fostering inclusive communities free of barriers to individuals underserved by existing housing program

Specific to Preservation of Existing Affordable Housing, the Georgia 2019 QAP highlights preservation as a key component of DCA’s work to ensure an adequate supply of affordable rental housing, advance sustainability, and retain historic structures through adaptive reuse.

Point Incentives

Preservation is a key component of DCA’s work to ensure an adequate supply of affordable rental housing, advance sustainability, and retain historic structures through adaptive reuse. Most importantly, preservation is a vital tool for maintaining affordability through the retention of federal rental assistance. In addition, preservation allows DCA to mitigate the risk of losing affordable housing projects due to market conversion, physical deterioration, or financial instability. Regarding sustainability, renovating existing buildings produces less construction waste, uses fewer new materials, and requires less energy than new construction. Further, little to no new utility or transportation infrastructure investments are required when existing buildings are rehabbed. Combined with energy efficient upgrades, rehabbing and preserving both aging rental and historic buildings is a conservative, cost effective way to meet growing demand for quality affordable housing. Additionally, historic preservation advances DCA’s stewardship of historic buildings and locations while maintaining cultural and community diversity. Finally, DCA seeks to utilize its 4% Bond Allocation to the maximum extent possible for preservation of affordable housing.

 

DCA will not consider 9% Credit Applications for the preservation of existing Housing Credit developments with a placed-in-service date that is within 18 years of Application Submission outside of Applications under the Rural HOME Preservation set aside.

Threshold

An Application for Credits for Bond Financed Projects must satisfy all applicable requirements set forth in Appendix I, Threshold Criteria, of the Plan and all applicable requirements set forth in the Plan.

To qualify for 9% Credits, a building generally must be placed in service during the year in which it receives an allocation. An exception is provided in the case where the Owner has expended more than ten percent (10%) of the reasonably expected basis in the building (the “Ten Percent Test”) no later than twelve (12) months after the Carryover Allocation. No project can receive more than one Carryover Allocation of 2018 Credits. For projects located in major disaster areas, extensions may be allowed pursuant to Revenue Procedure 2007-64.

Basis Boost

HERA authorizes state allocating agencies to designate certain areas not located in a QCT or DDA for up to a 30% basis boost. Projects may receive an allocation of credit based upon 130% of the eligible basis for new construction or substantial rehabilitation. Only projects that conclusively show that the boost is needed and that the project meets all of DCA’s underwriting and other criteria are eligible for the boost. The minimum request for the state-designated basis boost is 10% and any state basis boost request should be made on a full percentage point. DCA will evaluate the need for any state-designated basis boost at Application Submission and again at final project allocation application.

 

Projects in the following categories are eligible to apply for the boost:

1. Multifamily Rural projects without DCA HOME as a source.

2. Multifamily projects within areas that qualify for at least 3 points under Stable Communities (projects which appear to have a primary purpose of subsidizing an ownership transfer do not qualify);

3. Extraordinary circumstances which further the policies of this QAP. Extraordinary shall be defined as what is not expected or usual for the development of an affordable multifamily tax credit property. Low rents, high utility costs, and proximity to a QCT are not considered to be extraordinary circumstances.

 

All requests for the state-designated basis boost must indicate which category (or categories) of eligibility that the Application falls under, and any support documentation must be included in the Application.

 

Please note that a project located in a QCT or DDA is eligible to receive a 30% basis boost for new construction and/or rehabilitation and it is not subject to the State-Designated Basis Boost provision.

 

Extended Use

EXTENDED AFFORDABILITY COMMITMENT (Up to 4 Point)

Waiver of Qualified Contract Right

·         Three (3) points will be awarded to Owners willing to forgo the Qualified Contract "cancellation option"

·         Two (2) points will be awarded to Owners willing to forgo the Qualified Contract “cancellation option” for at least 10 years

·         One (1) point will be awarded to Owners willing to forgo the Qualified Contract “cancellation option” for at least 5 years.

·

Tenant Ownership

One (1) point will be awarded to Owners that commit to submit a plan for tenant ownership, acceptable to DCA, at the end of the 15-year Compliance Period. Only single-family styled units are eligible for these points. In order to qualify for tenant ownership plan points, Applicants must agree to submit a viable homeownership strategy with the Application for residents who will reside in the units. The strategy must outline the Applicant’s exit strategy, calculation of the estimated affordable purchase price for the unit occupied by the tenant, and pre-purchase homeownership counseling. All sites must be owned by the Applicant (long-term leases are unacceptable). Applicant must clearly show how the property will be managed during the compliance period and how the tenant’s down payment will be managed.

Contributed By: 
National Housing Trust

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