Low-Income Housing Tax Credits & Preservation in New York, 2017

New York City's 2017 Qualified Allocation Plan offers potential competitive scoring advantages for Preservation Projects. 

Point Incentives

Special Needs Populations - Special needs groups include homeless persons and families, persons who are mentally ill or disabled, persons with AIDS, persons with substance abuse disorders, and survivors of domestic violence and their families. (5 points)

a) Projects that set aside 35% or more of units for Special Needs groups and provide evidence of adequate provision of support services for the intended population by including a letter of interest from a social service agency [e.g. Office of Alcoholism and Substance Abuse Services (OASAS), Office of Mental Health (OMH), Office of Mental Retardation and Development Disabilities (OMRDD), the NYC Human Resources Administration (HRA) or the Department of Homeless Services (DHS)], stating that the agency has reviewed the project and determined that the applicant will be eligible for operating subsidies and/or supportive housing services through the agency. (4 points)

b) Sponsors that have previous experience in this type of housing or service delivery. (1 point)

Public Housing Waiting Lists - Scored on whether the sponsor has committed in writing to the Agency to designate at least 20% of the low-income units in which special preference will be given to households on the waiting list for public housing (1 point)

Historic - Projects where an existing building is landmarked, designated as historic, as defined by local, state, or federal law. (1 point)

Preservation Projects - Projects that preserve existing affordable housing that either are:

a) acquired through the City of New York's Third Party Transfer Program (TPT) or Multifamily Preservation Loan Program (MPLP);

b) physically andlor financially distressed;

c) properties with government-assisted regulated housing with use restrictions expiring in less than 10 years, or d) HUD-assisted 202 projects. (4 points)


Capital Needs Assessment - "standalone" rehabilitation projects must submit a Capital Needs Assessment to show adequate capital needs.


Basis Boost

The following guidelines apply equally to projects competing for an allocation of credits under HPD's Credit Authority and to "as-of-right" credits for tax-exempt bond financed projects. The determination of the amount of credit to be allocated to projects and the underwriting of projects will be made at each of the following times:

HPD will establish underwriting guidelines to ensure project feasibility and determine that credit allocated does not exceed the amount needed. Section 42 requires that two forms of financial analysis be employed in determining the amount of the credit allocation:

1) Qualified Basis Analysis - Based on:

a) Total qualified costs as adjusted, where allowable, for high cost areas.

b) The "applicable fraction," the lower flow-income units or floor space.

c) The monthly credit rate in effect; HPD will calculate the maximum credit amount for which the project could qualify. The amount of credit allowable will be the lower of the two amounts calculated above. (Actual allocation amounts may be lower than the amount allowable, depending on the availability of credit authority.) The following guidelines will be employed in performing the financial analyses described above.

Eligible Basis

In performing the Qualified Basis Analysis for Rehab/Construction credits, HPD will recognize Eligible Basis in amounts not exceeding $300,000 per residential unit for 9% projects and $400,000 per residential unit for 4% projects. For competitive 9% projects this maximum will apply the year the project first applies. For "as-of-right" 4% bond projects this maximum will apply the year the project submits a "financial update" in anticipation of an IRS Form 8609. However, the Commissioner of HPD has the right to waive the eligible basis maximum if the applicant can demonstrate there is good cause to do so. Waiver requests must be in writing and include documentation in support of the request.

30% Basis Boost - The Code provides that all projects located in a HUD-defined QCT or in a Difficult Development Area (DDA) are eligible for up to a 30% increase in basis. HUD has designated only certain zip codes in New York City as a DDA. However, the Code also allows allocating agencies to designate areas within their jurisdiction as DDA's. HPD has designated all five boroughs in New York City as a DDA. Therefore, all 9% projects in New York City will be eligible for the basis boost. (4% projects are only eligible for the basis boost if they are located in a HUD-defined QCT or DDA.)


Extended Use / Y15 / Qualified Contracts

The New York City 2017 QAP asks Owners of 9% projects to enter into a 30-year regulatory agreement with the HPD for extended low-income use of the project that is in conformance with the requirements of Section 42. Owner’s would also agree to give HPD the option to extend the affordability period of an additional number of years, up to 30 years, if HPD extends the Project’s tax exemption for an equal number of years. Owner’s would also agree to maintain the Extended Use period by including in the regulatory agreements a waiver of the right to seek a qualified contract to purchase the project at the end of the 15-year compliance period.

The regulatory agreement of the administrative process for extended use period will specify the following for the low-income portion of the building(s):

I) The agreement shall be binding on all successors of the owner;

2) The project is subject to the requirements of Section 42 of the Internal Revenue Code of 1986;

3) The owner shall agree to attach a lease rider to the lease of each low-income unit on forms provided by HPD that will disclose the restricted rent for such unit;

4) The lease rider which the owner must attach to the lease of each low-income unit will require the tenant to annually provide income verifications to the owner;

5) The owner shall agree under the regulatory agreement that the applicable fraction (as defined in subsection (c) (1) of Section 42 of the Internal Revenue Code) for the building for each taxable year in the extended use period will not be less than the applicable fraction for the building when placed in service;

6) The owner shall consent to enforcement in any State court of the extended use requirement by anyprospective, present or former income eligible persons;

7) The owner shall annually submit to HPD a certification that the building is owned and operated incompliance with the provisions of Section 42 of the Internal Revenue Code and any regulations promulgated thereunder;

8) The owner shall not retaliate against any tenant who notifies HPD of alleged violations of the regulatory agreement.

9) Project owners will be allowed to increase rents to 30% of 80% AMI upon vacancy on tax credits units after the thirty-year compliance period. HPD is responsible for enforcing all regulatory agreements and reporting non-compliance. All correspondence and/or legal notices relating to the regulatory agreement should be addressed to HPD.

Contributed By: 
National Housing Trust

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