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

The 2018 Nevada Qualified Allocation Plan (QAP) provides incentives for preservation and prefers projects that extend their affordable housing contracts and include at-risk properties. The QAP lists thresholds and specific requirements for acquisition and rehabilitation projects.

Low Income Housing Tax Credits (9%)

Objectives of the qualified allocation plan:

  • Preserve existing affordable rental housing
  • Contribute to a vibrant and sustainable economy by supporting and facilitating the construction of affordable workforce housing near employment centers 

Demand for housing credits often exceeds supply. In determining how and where to allocate the credit, the Division must consider the need for affordable housing throughout the state of Nevada. The purpose of the QAP is to reserve Federal Tax Credits for the creation and maintenance of rental housing units for low and very low-income households in the state in such a way as to further the following principles and priorities:

• Reserve credits in order to provide an equitable distribution throughout the state;

• Reserve credits for areas of greatest need as supported by the Annual Affordable Housing Survey “Taking Stock” and consistent with the Housing Priorities 1, 2 & 8 in the 2015-2019 HUD Consolidated Plan (see General Information)

• Reserve credits in order to provide a reasonable mix of affordable housing projects, both in regard to the number of units, populations served (e.g., elderly, special needs, families) and type (e.g., mixed use);

• Reserve credits to as many rental housing projects as possible, considering cost, size, location, income mix of proposals, and environmental sustainability;

• Reserve credits in order to provide opportunities to a variety of qualified Applicants, both for-profit and non-profit; and

• Reserve only the amount of credit that the Division determines to be necessary for the financial feasibility of a project and its viability as a qualified low-income housing project throughout the credit period.

Acquisition/Rehabilitation Projects

This category is designed to facilitate the rehabilitation of certain properties. If the proposed project is a multifamily project acquisition/rehabilitation, a multi-family project rehabilitation or change of use to multi-family project, the application must include:

1) Capital Needs Assessment (CNA). A CNA is required for all acquisition/rehabilitation or conversion projects whether or not the project will maintain its affordability for 30 years or more. The CNA must be prepared by a competent, industry acknowledged, third-party. The CNA must list planned expenses by component category. Each item should be clearly identified in the format for itemizing planned expenses, including quantities and costs per units and costs per item, as outlined in a Planned Expenses by component report. The Division reserves the right to have its 3rd party estimator review the CAN and offer input into the scope of work. In a scattered-site property, the CNA must reflect costs associated with the rehabilitation or each unit by unit contained in the project.

2) Scope of Rehabilitation. Rehabilitation shall be defined as repair or renovation of an existing residential structure and excludes the demolition or expansion of the footprint of the buildings. Rehabilitation Projects must demonstrate that the costs associated with the rehabilitation is substantial. Except as otherwise provided in this Section; Rehabilitation Projects must include costs of at least $30,000 per unit. To demonstrate the $30,000 per unit of costs, the Applicant must provide documentation which supports the costs. The Division will not include the following costs in determining the $30,000 per unit cost:

• Construction Overhead or any other Overhead

• General Requirements

• Any Reserves

• Parking Lots/carports

• Landscape/Irrigation

• Pools & Spas

• Recreational courts

• Garden walls& Gates

• Non-residential bldg’s

3) Service Date. All buildings must be put into service within two years from the date of the Carryover Allocation of the Tax Credits, or the Tax Credits will be terminated and returned to the Division.

4) Tenant Displacement and Relocation. To minimize displacement of existing tenants, the Applicant/Co- Applicants may choose to income-qualify all tenants immediately upon acquisition of the buildings in the project.

5) Prior Ownership. Applicants or Co-Applicants must provide a detailed ownership history of buyer and seller in order to verify the IRS 10 year hold rule for projects that are seeking resyndication. The Applicant’s or Co- Applicant’s prior ownership interest in the property cannot exceed 50%3. No sale will be allowed from one partnership to another partnership if the entity selling the property is also one of the limited/general partners purchasing the property, and the entity selling the property has more than a 50%interest in the purchased property except as allowed in HERA.

6) Lead Based Paint. Under the Uniform Physical Conditions Standards, housing projects must comply with Lead Safe Housing Rules4. These requirements apply to buildings and units built before 1978. Paint with at least one milligram of lead per square centimeter of paint, or with a half percent of lead by weight, is considered lead-based paint and subject to the federal regulations. Typical lead based paint hazards include deteriorated paint and dust or bare soil with lead above specified levels.

11.9.1 Additional Requirements [Not applicable to Tax Exempt Bond projects] The property of a Rehabilitation Project must be not less than 20 years from the most recent tax credit Placed in Service Date at time of application. If you have an Acquisition/ Rehabilitation of a senior project, please see the exception in Section 14.2.1.

Points Incentives

For Acquisition/Rehabilitation in addition to receiving amenities points for new amenities to be added to the project, points shall be awarded for upgrades to existing amenities if: (i) the Capital Needs Assessment (a) identifies the amenity or amenities, (b) states that the amenity or amenities need to be upgraded, and (c) identifies the amount of capitalization needed for the amenity or each of amenities to be upgraded; and (ii) the Applicant/Co-Applicants propose in the application to upgrade the amenity or amenities.

Historical Character

A Project that contributes to the historic preservation, documentation and/or use of cultural resources as determined by the Nevada State Historic Preservation Office (SHPO) including, but not limited to, adapting and/or renovating properties listed on the National or State Historic Registry must submit a letter from the SHPO indicating the above – 3 points

Smart Designs

A maximum of 16 points will be awarded for Smart Design. Specific verifiable documentation must be supplied for all points claimed. Pictures with referenced land marks and/or legible signs indicating bike and pedestrian paths are required to take credit for points if there is no official on-line documentation of the amenity on a map or website.

Nevada based companies – Applicant/Co-Applicants agree to employ at least 2 third-party Nevada based companies (contractors, accountants, attorneys, architects, etc.) in the development process andprovide certification as to their use upon Division request. Nevada products – projects can demonstrate the use of products and goods manufactured by Nevada-based corporations that are incorporated into the development (must submit a list of Nevada-based corporations and products that will be utilized in the development) Must provide certification as to their use upon Division request.

A. Site Location – Up to five points will be awarded.

1) The site (or designated center of the site for scattered-site projects) is within ¼ mile of at least three of the following: grocery, pharmacy, bank, school, day care, parks, community centers, medical facilities, library, place of worship, post office (proximity to day care facilities is not applicable for Senior Housing projects) – 2 points

2) The site (or designated center of the site for scattered-site projects) is within ¼ mile of a designated pedestrian/bicycle path aside from sidewalks – 1 points

Clark and Washoe Counties:

3) The site is within ¼ mile of a local transit route or school bus stop (school bus stop is not applicable for Senior Housing projects).

OR

Other Counties The site is within 1/2 mile of a local transit route or school bus stop (school bus stop is not applicable for Senior Housing projects) – 1 point

4) Project is USDA funded

5) The project’s capacity to serve as a stimulus for other development in the vicinity or to provide a needed residential population that may support nearby local businesses in the area and thus promote a more vibrant neighborhood environment (must submit with the application a letter from the Director of the local jurisdiction’s Community Development Department or their equivalent, stating the above and their support) – 1 point

B. Up to eight points for the installation of renewable energy sources (e.g., photovoltaics, wind power).

Renewable energy sources that offset the project’s total estimated electricity demand by:

• At least 5% (4 points),

• Greater than 5% up to 10% (6 points),

• Greater than 10% (8 points).

Application must contain a report by an electrical engineer detailing the project’s projected energy demand and a plan for installing enough renewable energy to produce the energy offset required. 

C. One point for foam board wall sheathing used on exterior walls (minimum R-4 nominal in southern Nevada and R-5 nominal in northern Nevada), or for blowin/ spray fiberglass, cellulose or foam wall insulation – 1 point

D. Two points for structural insulated panels (SIPs) or insulated concrete forms – 2 points

E. Energy Efficient Systems

    • Energy Star qualifying gas tankless, heat pump, solar or gas condensing hot water heaters. (1 Point)
    • Commercial water heaters or boilers (1 Point)
    • Appliances with a thermal efficiency of 94% or higher (2 Points)

(To receive points in this category the appliances must conform to Division Energy Standards and be approved by Barbara Collins from ERH West (bcollins@erhwest.com) within 60 days of application. Approval requests must be sent into ERH West no later than 14 days prior to the application deadline in order to be considered for the 2018 QAP. Include in your application a letter or email showing the exact specifications, make and model that you have submitted for approval and the approval response from ERH West. The Division will not go back and obtain approval of your submission if not already pre-approved in your package - ½ point

MAXIMUM SMART DESIGN POINTS – 16 points

Set Asides

Rehabilitation developments must demonstrate that the rehabilitation is substantial and involves at least an average of $30,000 per unit in direct costs (actual construction costs) for 9% projects and $15,000 per unit for 4% projects prior to incorporating the mandatory energy requirements of this QAP. If the CNA reflects a per unit investment of less than the required per unit cost, the project will not be considered for Tax Credits.

Additionally, Nevada’s 2017 QAP sets aside 10% of its total allocation to USDA-RD projects (totaling $740,377).  The set-aside is limited to acquisition/rehabilitation projects.

Extended Use

The minimum compliance and affordability period for Tax Credit projects is 30-years. An Applicant/Co- Applicant has the option of extending this period in increments of 5-years up to a maximum of 50 years. An exception is for Tenant Ownership projects, for which the initial compliance/affordability period is 15  years and then remains in effect as an affordable rental unit until the unit is sold. The Division will not agree to stipulations or subordination agreements to reduce LIHTC affordability periods. All applicants for 4% and 9% tax credits are required to sign a waiver forgoing the Qualified Contract process.

Affordability Period

A maximum of four (4) points will be awarded to Applicants/Co-Applicants that extend the period of

affordability beyond the required 30 years. Applications will receive one preference point for each additional 5-year period of affordability, not to exceed 50 years. See Section 13.2 with regards to the QC waiver process.

One point for each 5 years of extended affordability.

MAXIMUM AFFORDABILITY PERIOD POINTS 4

Thresholds

Projects which do not score at least 60% of the available points will be rejected for tax credits regardless of project category selected or program for which they are competing under.

The project must maintain minimum annual replacement reserves unless modified in writing by the Nevada Housing Division as follows, with the potential that USDA project reserve requirements may be different:

1) For all other Acquisition/Rehabilitation projects: $325 per unit.

Basis Boost

Beginning with the 2016 DDA, HUD is designating metropolitan DDAs using Small Area Fair Market Rents

(SAFMRs), rather than metropolitan-area FMRs. The 2016 metropolitan DDAs are designated by ZIP Code Tabulation Areas (ZCTAs) rather than entire metropolitan areas. While the geographic extent of ZCTAs is very similar to current 5-digit ZIP codes, the U.S. Postal Service (USPS) may alter specific ZIP code geography at any time after HUD designates SADDAs. The HUD SADDA mapping tool can be found online at 2016 SDDAs. Applicant/Co-Applicants with projects located in these hypothetical SADDAs is authorized to utilize 130% of eligible basis as a factor in determining the adjusted eligible basis for the 2018 QAP. Any changes to SADDA designations subsequently made by HUD that are applicable to the 2018 Tax Credit application period, will be incorporated into the 2018 QAP following publication in the Federal Register or other appropriate notice. Applicant/Co-Applicants with projects located in Qualified Census Tracts (QCT) for 2017 are authorized to utilize 130% of eligible basis as a factor in determining the adjusted eligible basis for the 2018 QAP Any changes to QCT designations subsequently made by HUD that are applicable to the 2018 Tax Credit application period, will be incorporated into the 2018 QAP following publication in the Federal Register or other appropriate notice.

Additional DDAs

As allowed in HERA, the Division will designate additional DDAs and/or projects and/or buildings eligible to 130% of eligible basis as a factor in determining the eligible basis. Applicant/Co-Applicants with projects meeting the criteria set forth below must submit a request to implement the “boost” in their application. The Division approval does not signify that boost credits will be awarded and only signifies that a project meets one or more of the eligibility criteria to claim the boost included below. The Administrator may retroactively allow for the boost in unique situations. Administrator can authorize up to a 30% boost for projects that have the following project criteria:14 or Projects which may be funded from the Other Counties category or with the USDA-RD Set-Aside. 

A maximum of five (5) special scoring points will be awarded to applications with Developer Fees below 15% of the eligible basis. Points will be awarded on the basis of one point for each 1% reduction in developer fee up to a maximum of five points. The Developer Fee will be calculated based on the figures provided in the budget contained in the main application. Applicants do not have to submit additional back-up. It is the responsibility of the Applicant/Co-Applicants to ensure the correct figures are contained within the project budget. Staff will not change scoring due to transposed numbers or incorrect figures in the budget. The Developer Fee for competitive 9% projects must not exceed15% of eligible basis of the project excluding the Developer Fee. The fee includes profit and overhead of the Applicant/Co-Applicant, in addition to fees for consultants/processing agents. The Developer Fee will no longer be calculated utilizing the 30% Metropolitan/Non-Metropolitan DDA/QCT boost and/or the state authorized basis boost in the 2016 QAP.

The cost certification must reflect the Developer Fee percentage disclosed within the original application and may not be changed for any reason. Staff will take the Developer Fee percentage to two decimal places and will not round up or down. The amount of the Developer fee may not increase from the amount claimed in the original application.

FEE TABLE (9% Program Only) RATING FACTORS

A. Less than 11% - 5 points

B. 11.0% to 11.99% - 4 points

C. 12.0% to 12.99% - 3 points

D 13.0% to 13.99% - 2 points

E 14.0% to 14.99% - 1 point

F. >15% - 0 points

Distressed Communities/Community Revitalization Plan

Project Location - Five (5) preference points will be awarded if the project meets any of the following project location criteria:

RATING FACTORS POINTS

A. Project is located in a CDBG eligible Qualified Census tract AND must be covered by a State

or local Concerted Community Revitalization Plan – 5 points

B. Project is located in a non-CDBG eligible Census Tract – 5 points

MAXIMUM LOCATION POINTS – 5 points

Contributed By: 
National Housing Trust

Other Items of Interest