Low-Income Housing Tax Credits & Preservation in Kansas, 2018

The Kansas Housing Resources Corporation (KHRC) establishes tax credit set asides for the preservation of existing affordable housing in their 2018 Qualified Allocation Plan (QAP).

Set Asides

KHRC has identified preservation as one of five housing needs priorities for the tax credits program; Preservation of housing with a HUD Section 8 or USDA Housing Assistance Payment contract, or any application from or for a Public Housing Authority is established as one of 5 priority housing needs. 15 bonus points (up to a maximum of 45 points) can be awarded for each of these priority housing needs targeted.

Point Incentives

Developments that preserve existing affordable housing that would be subject to foreclosure or default if tax credits were not available as indicated by deteriorating physical condition, high vacancy rate or poor financial performance receive 10 points.

Additionally, developments that provide rehabilitation of existing, structurally sound, energy efficiency, affordable housing will be awarded points on hard costs for rehabilitation per units on a sliding scale as follows:

  • $10,000 - $20,000 per unit: 5 points
  • $20,001 - $30,000 per unit: 10 points
  • $30,001 - $40,000 per unit: 15 points
  • Over $40,001 per unit: 20 points

The selection of properties for acquisition and rehabilitation credits will be determined by the following list of criteria:

  1. The ratio of acquisition and hard cost to total costs will be reviewed. A high acquisition percentage is primarily refinancing with minimal rehabilitation. Developments with a lower acquisition and a higher rehabilitation percentage will be favored for credits.
  2. The increase in rents should be minimal, if any, as a result of the acquisition and rehabilitation. Developments that anticipate a significant rent increase after receiving financial assistance are not encouraged to apply for credits.
  3. A large majority of the existing tenants should be income eligible under the tax credit program. Tenant displacement is strongly discouraged.
  4. Existing low income properties under a threat of foreclosure and removal of existing tenants will be given a priority for financing.
  5. Other factors that will be reviewed include the remaining length of time on any Housing Assistance Payments contracts, the availability of replacement reserves, and the current vacancy rate.
  6. A minimum rehabilitation cost of $10,000 per unit averaged over a building is required and must be documented with a third party capital needs assessment to be considered for a credit reservation. However, a waiver may be requested if the rehabilitation is a total replacement of all essential systems in the unit and building.
Y15/Qualified Contract

Owners with eligible properties who want to opt out of the program have an opportunity to exercise the qualified contract provision outlined in the IRC at Section 42(h)(6)(F). This option may be invoked after the 14th year of the compliance period by writing a letter to KHRC requesting that the corporation locate a purchaser for the property in question. To process the request the following steps are required:

(a) A non-refundable fee of $1,000 is due KHRC at the time the contract price based on the IRC formula is approved. (b) The owner must provide a waiver of all purchase options including any right of first refusal contained in the partnership agreement. (c) The property must meet or exceed HUD’s Uniform Physical Condition Standards. (d) The contract price based on the IRC formula must be provided with sufficient documentation to allow KHRC staff to verify the price. (e) An appraisal of the property must be provided if there are market rate units at the property.

Upon receiving the written request from the owner, KHRC will list the property on its web site and will have one year to locate a purchaser. If a purchaser is not determined the owner will be released from the covenant that binds the property, provided that the low-income tenants currently residing at the property will be protected for another three years from any eviction other than for good cause and from any increase in the gross rent not otherwise permitted under the Section 42 regulations. If a purchaser is located and the owner decides not to sell the property the restricted use provisions will continue for another fifteen years. Owners entering the three-year decontrol period shall have 90 days from the beginning of the period to provide the final annual report and compliance fee.

Distressed Communities

10 points will be awarded is property is located in a HUD defined Qualified Census Tract or Difficult Development Area.

Applications meeting the preliminary requirements will be further reviewed for non-point criteria. Applications may be accepted or rejected based solely on the non-point criteria, which includes any development in a market area that is experiencing job growth and economic development where tax credit housing can have an impact and documented with letters from employers/city officials/economic development representatives/government officials, newspaper articles or studies.

Community Revitalization Plans

Twenty points will be awarded to developments involving the use of housing as part of a community revitalization plan, including the adaptive reuse of a building that is eligible for the historical register or is sited in an officially declared historic district or developments that are eligible for a real estate tax exemption based on state statute or local ordinance, or similar equivalent local contributions.

 

Contributed By: 
National Housing Trust

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