Low-Income Housing Tax Credits & Preservation in North Dakota, 2018

The 2018 North Dakota Qualified Allocation Plan (QAP) includes incentatives for the preservation of existing affordable housing.

Low Income Housing Tax Credits (9%)


Applications must receive a minimum of 55 points as determined by the NDHFA, in its sole discretion, to be eligible for further consideration.

NDHFA may waive the $15,000 minimum average rehabilitation threshold requirement if a capital needs assessment supports a lower rehabilitation requirement. See Section V (Threshold Requirements) for information on completing a capital needs assessment.

A Capital Needs Assessment (CNA) must be submitted with the application package involving rehabilitation or adaptive reuse. The CNA must be completed by a competent, independent third party acceptable to the NDHFA, such as a licensed architect or engineer. The assessment will include a site visit and a physical inspection of the interior and exterior of all units and structures, as well as an interview with available on-site property management and maintenance personnel to inquire about past repairs and improvements, pending repairs, and existing or chronic physical deficiencies. The assessment will consider the presence of environmental hazards such as asbestos, lead paint and mold on the site.

The assessment will include an opinion as to the proposed budget for recommended improvements and should identify critical building systems or components that have reached or exceeded their expected useful lives. If the remaining useful life of any component is less than 50 percent of the expected useful life, immediate rehabilitation will be required unless capitalized. If the remaining useful life is less than the affordability period of 30 years, the application package must provide for a practical way to finance the future replacement. The assessment will also include a projection of recurring probable expenditures for significant systems and components impacting use and tenancy, which are not considered operation or maintenance expenses, to determine the appropriate replacement reserve deposits on a per unit per year basis. The assessment will examine and analyze the following:

  • Site, including topography, drainage, pavement, curbing, sidewalks, parking, landscaping, amenities, water, sewer, storm drainage, and gas and electric utilities and lines;
  • Structural systems, both substructure and superstructure, including exterior walls and balconies, exterior doors and windows, roofing system, and drainage;
  • Interiors, including unit and common area finishes (carpeting, tile, plaster walls, paint condition, etc.), unit kitchen finishes, cabinets and appliances, unit bathroom finishes and fixtures, and common area lobbies and corridors; and
  • Mechanical systems, including plumbing and domestic hot water; HVAC, electrical, lighting fixtures, fire protection, and elevators.

Applicants are advised to also consider the requirements of other funding sources, such as USDA Rural Development, when ordering a capital needs assessment.

Point Incentives

A Redevelopment and Revitalization project will receive 5 points if it meets one of the following conditions:

(1) The project is located on a site considered by NDHFA, in its sole discretion, to be grayfield or brownfield in nature. For purposes of this Plan, the term grayfield refers simply to previously developed property while brownfield refers to previously developed property where future use is affected by real or perceived environmental contamination.

(2) The project is in a QCT or city revitalization area established by resolution or other legal action by the city, and the development of the project contributes to a concerted community revitalization plan, as defined in section IIB of this Plan.

Adaptive reuse projects are eligible for points under this category. Rehabilitation of existing habitable and occupied housing is not.

Preserve Existing Affordability - 5-12 points

Federally assisted projects in danger of prepayment, such as Rural Development 515 financed or those with project-based rental assistance for 50 percent or more of the units, which are "at-risk" of being lost from the state’s affordable housing inventory, and were not tax credit projects, will receive 10 points.

Existing LIHTC projects that are near the end of the initial 15-year compliance period and did not waive the ability to opt out will receive 10 points. LIHTC projects that waived their ability to opt out of the extended use period will receive 5 points.

Provide a copy of all relevant documents as applicable:

(1) HAP Contract

(2) Regulatory Agreement

(3) Filing documents of intent to opt out

(4) Loan documents that describe the ability to pre-pay the financing including required approvals and/or penalties

(5) Copy of most recent REAC or RD inspection report or other evidence of physical deterioration that would threaten the HAP contract

(6) At least three market comparables for each bedroom size to indicate what market rents might be achievable at the project without the federal assistance restrictions

(7) Narrative describing the dissolution of current ownership/management entity capacity Properties that are historic in nature (i.e. on the National Register of Historic Places or determined eligible by the State Historic Preservation Office for review by the National Park Service) will receive an additional 2 points.

Extended Use

Extended Low Income Housing Commitment: Prior to a final allocation of tax credits, the owner must enter into an Extended Use Agreement which requires the owner and any successors to meet the applicable fraction of low income occupancy for an extended use period of at least 15 years beyond the initial 15-year compliance period. The owner must record this agreement as a restrictive covenant.

Extended Duration of Low Income Use - 3-9 points

Points will be awarded to projects that maintain units for low-income occupancy for a period of at least 5 years beyond the 15-year minimum compliance period. For each additional 5-year compliance period, an additional 3 points will be awarded. Projects will  be bound by these terms through the use of a Land Use Restrictive Agreement (LURA). The maximum is 9 points.

Basis Boost

The eligible basis for a new building is arrived at by taking all costs not allowable

under the Code, including land, and subtracting them from the total project cost.

The eligible basis for an existing building is the sum of the acquisition cost plus additions and improvements, but only if the building has not been placed-in-service or substantially rehabilitated in the preceding 10 years. For exemptions to this rule, see page 7 (B. Existing Projects). Eligible basis is reduced by federal grants, residential rental units which are above the average quality standard of the low-income units, any historical rehabilitation credits, and non-residential rental property.

Eligible basis may be increased by 30 percent for projects meeting any of the following conditions:

(1) The project is located in a HUD-designated Difficult Development Area (DDA).

(2) The project is located in a HUD-designated Qualified Census Tract (QCT) and the development of which contributes to a concerted community revitalization plan. For purposes of this Plan, a concerted community revitalization plan is defined as a locally approved revitalization plan targeting specific existing areas or neighborhoods within the community for housing and economic development including the infill new construction or rehabilitation of housing. To qualify, the plan must be officially adopted by the local governing body, identify a specific time period, apply only to a defined geographic area within the community, and specifically call for infill new construction or rehabilitation of affordable housing within the boundaries of the plan. Local housing needs surveys, consolidated housing or economic development plans, short-term work plans, municipal zoning or land use plans, or plans which are so broad as to encompass the entire community or so narrow as to encompass only the project’s subject property do not qualify under this definition.

(3)* The project meets one of the following NDHFA designations:

A. The project is designed to primarily serve special needs populations, (i.e. homeless or those requiring permanent supportive services).

B. The project targets 20 percent or more of the units at 30 percent of area median income or less.

C. The project is within tribal reservations, including the Trenton Indian Service Area.

D. The project entails new construction on in-fill lots a) with existing structures which need to be demolished or b) requiring substantial environmental remediation.

E. The project is located in a rural area without sufficient soft financing to be financially feasible in low market-rent areas. Proposed rents (including utility allowance) must be the lesser of a) Fair Market Rents (FMR) or b) a minimum of 20 percent below Housing Tax Credit rent ceilings, either of which will be enforced through a land use restriction agreement (LURA). Developments with a project-based federal rent subsidy are not eligible.

Applicants must provide a narrative explanation justifying the need to increase the eligible basis. Basis boost is not available on 4 percent acquisition credits. *The potential basis boost under condition (3) above does not apply to tax-exempt bond financed projects. The potential basis boost under conditions (1) and (2) above does apply to tax-exempt bond financed projects. The NDHFA is obligated to allocate only the amount of credit necessary to make the project financially feasible.

Contributed By: 
National Housing Trust

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