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

The 2018 Missouri Qualified Allocation Plan (QAP) includes a set-aside for preservation. 

Low Income Housing Tax Credits (9%)

To be considered for a 9% Credit or 4% Credit allocation, an application must be submitted in accordance with this Plan, the NOFA, and the Developer’s Guide. MHDC shall have the right to consider any application for 4% Credits for a potential allocation of 9% Credits if the application meets the requirements and competes successfully with other 9% Credit applications. Similarly, MHDC may consider any application for 9% Credits for a potential allocation of 4% Credits.

The 9% Credit includes any 70% present value credit and any 30% present value credit for qualified existing buildings which also will use the 70% present value credit. For rehabilitation projects seeking 9% credits, the total construction costs must equal or exceed 40% of the total replacement costs.

The 2018 QAP also establishes property disposition as a funding priority: applicants may compete for the purchase of real estate owned by MHDC. The application must propose an acquisition/rehabilitation transaction that will be evaluated on its merits according to the selection criteria and its ability to demonstrate potential long-term success as an affordable housing property.

Set Asides

Preservation (eligible for 30% boost in eligible basis): The preservation of existing affordable housing will receive a preference in funding (“Preservation Priority”). To qualify for the Preservation Priority, a development must meet at least one (1) of the following criteria and, if receiving federal historic credits and/or state historic credits, must waive the right to opt out of the LIHTC LURA to be recorded against the development for an additional fifteen (15) years beyond the Compliance Period:

a. Have and continue to use, if possible, project-based rental assistance and/or operating subsidy;

b. Have a loan made prior to 1985 from any of the following loan programs: HUD 202/811, 221(d)(3) or (d)(4), 236, or USDA RD 515;

c. Participate in HUD’s Mark-to-Market restructuring program; or

d. Have a previous allocation of low-income housing tax credits in which the first year of the Credit Period (as defined in §42(f)(1) of the Code) was 1999 or earlier, and be in or have completed the final year of the Compliance Period for all buildings in the development.

In order to be considered for this priority, the applicant must include the following with the application:

i. Copies of all loan notes and regulatory agreements encumbering the property;

ii. A copy of any project-based income or operating subsidy agreements and rent schedules;

iii. Audited financial statements for the development covering the three (3) most recent years;

iv. A physical needs assessment or, for RD applications, an “as-is” CNA that meets USDA-RD requirements;

v. If the development has HUD or MHDC financing or is encumbered by a LIHTC LURA or an MHDC Regulatory Agreement (“Regulatory Agreement”), then a letter from HUD or MHDC indicating the need for preservation is required (please see v. below if the proposed preservation development has an RD loan); and

vi. If the proposed development includes USDA-RD financing, the application must include a letter addressed to MHDC from the RD State Office indicating (1) RD support for the application, and (2) the applicant has met with either the RD State Office or Area Specialists prior to preparing/submitting the application to MHDC. The purpose of the meeting is to review the entire structure of the proposal with RD including, but not limited to, a discussion of the proposed scope of work, Capital Needs Assessment (“CNA”), financing structure, rents charged, operating budget, the potential amount of additional RD required Replacement Reserves, and any other unique feature or complexities pertaining to the development application. It is recommended applicants supply RD with a copy of the “as-is” CNA prior to this meeting.

Thresholds

In all rehabilitation proposals, the scope of work shall address work to be done in all units within the development. Should any unit not require work, documentation as such must be noted in the scope of work. No units shall be left unaddressed.

Rehabilitation developments with special needs set-aside units must meet the requirements below and must increase the number of units incorporating the principles of universal design to a percentage equal to or greater than the special needs set-aside percentage. The requirements set forth in below for accessibility, hearing, and visual impairments can be included in the units incorporating universal design.

All developments with twelve (12) or more units are required to have a minimum of 5% of the units (rounded up to the nearest whole number) designed in compliance with one of the nationally recognized standards for accessibility to wheelchair users and an additional 2% of the units (rounded up to the nearest whole number) usable by those with hearing or visual impairments

Basis Boost

Increase in Eligible Basis: Developments located in a Qualified Census Tract or in a Difficult Development Area, as defined below, may be eligible to increase eligible basis by up to 30%.

a. Qualified Census Tract. Developments located in areas designated by HUD as Qualified Census Tracts.

b. Difficult Development Areas. Developments located in areas designated by HUD to be difficult to develop.

c. State Designated Difficult Development Areas. Pursuant to §42(d)(5)(B)(v) of the Code, MHDC may establish criteria to designate additional properties approved for 9% Credits to be treated as located in a difficult development area For purposes of this Plan, to qualify for such an increase, properties must meet at least one (1) of the following criteria:

i. Be determined to meet the qualifications of the Preservation Priority;

ii. Be determined to meet the qualifications of the Set-aside Preferences and demonstrate the property owner will incur direct costs in addition to costs covered by third parties in the provision of services to enhance the residential stability and independence of vulnerable persons and special needs residents;

iii. Be determined to meet the qualifications of the Service-Enriched Priority;

iv. Be a family development located in a county whose median income is below the 2016 statewide median income, as established and published by HUD, and propose to set aside 15% to 25% of the total units to be occupied by households earning between 60% and 80% of the area median income (workforce units), calculated using the appropriate income limits; or

v. Be part of a larger mixed-use economic development area. For a development to qualify as part of a mixed-use economic development area, it must:

1. Be part of a mixed-use economic development area that include different housing types for different household income levels, new retail/office/light industrial space that creates new permanent jobs, and new public space or activity centers designed for users of the area; or

2. Be part of a Transit Oriented Development (“TOD”) plan. The TOD plan must be centered around and integrated with a transit stop and the proposal must be located within 1,750 feet of a transit stop. The TOD plan must be mixed-use, mixed-income, pedestrian friendly, and of appropriate density for a TOD. 

MHDC will decide, in its sole discretion, what evidence and what types of development will qualify for an increase in eligible basis for mixed-use economic development areas. An important factor is that the MHDC development is not the only development, and the MHDC development will enhance the overall plan, rather than be the overall plan. It is expected the plan, of which the MHDC development is a part of, contemplates the development of multiple buildings over an area of reasonable size. This will not apply to a singular structure, regardless of location. Further details regarding difficult development area requirements can be found in the Developer’s Guide.

Extended Use

MHDC encourages developments providing quality housing with low affordable rents for an extended period of time. As a result, a preference in funding will be given to applications that agree in advance to waive the right to opt out of the LIHTC LURA at the end of the Compliance Period and maintain the development as affordable housing for a minimum of thirty (30) years (“Extended Use Priority”). This priority is not available to developments with historic credits or single-family homes.

Distressed Communities / Community Revitalization Plan

Redevelopment Plan. Applications that are a part of a redevelopment plan which has been approved/adopted by a local government will receive a preference in funding. The application must include a letter from the local authorizing official that the proposed development is a part of the redevelopment plan

Contributed By: 
National Housing Trust

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