Low Income Housing Tax Credits & Preservation in Ohio, 2018-19

 Ohio's 2018-19 Qualified Allocation Plan (QAP) includes seperate pools for new construction and preservation. The Ohio QAP also awards point incentives for preservation.

Set-Asides

Ohio’s 2018-19 Qualified Allocation Plan has separate pools for new construction and preservation projects. Section 9 Public Housing does not qualify for preservation of subsidy.

Urban Subsidy Preservation

  • Approximate Funding Target  : $3,000,000
  • Maximum per application: $1,000,000

Proposed developments located in an urban area and involving acquisition and substantial rehabilitation of multifamily housing developments receiving project-based rental assistance or operating subsidies through a program administered by the USDA or HUD will be considered in the Urban Subsidy Preservation allocation pool.

Set-Aside: Non-QCT Urban Preservation A set-aside for allocation to one housing development in a non-QCT will be administered by OHFA.

Non-Urban Subsidy Preservation

  • Approximate Funding Target: $3,000,000
  • Maximum per application: $700,000

Proposed developments located in a Non-urban area and involving acquisition and substantial rehabilitation of multifamily housing developments receiving project based rental assistance or operating subsidies through a program administered by the USDA or HUD will be considered in the Non-Urban Subsidy Preservation allocation pool.

Set-Aside: Non-QCT Non-Urban Preservation A set-aside allocation to one housing development in a non-QCT will be administered by OHFA.

Point Incentives

Preservation projects are eligible for 5 points by choosing one of the following priorities:

  1. Financially Troubled Asset. An asset that meets all of the following:
    1. Development is either at risk of default or foreclosure or has negative cash flow;
    2. Development was acquired by applicant in the last two 18 years, and had above conditions at the time of purchase and seller was not a related entity;
    3. The seller did not receive any operating, maintenance or other reserve funds as a result of or concurrent with the sale of the asset. The applicant shall submit a brief narrative describing the troubled asset and those steps that have or will be taken to put the asset back into productive use and a copy of the sales agreement or other sufficient proof of adherence to the above requirements as determined in OHFA?s sole discretion.
    4.  Good Management. Developments that have been maintained through good management but contain at least one major component that is past its effective useful life. Major components are defined in the above Substantial Rehabilitation section. The developer/owner must have been the owner for at least five years and must remain a part of the ownership structure if seeking points for this criterion. The applicant will submit a brief narrative describing the management history, the components that need replacing and a detailed itemization of the use of the projects replacement reserves. OHFA will determine this score in part by a site visit to verify the overall condition of all buildings in the proposed development as well as the critical needs identified and supported in the Capital Needs Assessment. The proposed development cannot have undergone Substantial Rehabilitation in the last 20 years.
    5. Risk of Market Rate Conversion. Developments which have a significant risk of conversion to market rate use evidenced by an affordable rent advantage of at least 20 percent for each bedroom size in the primary market area. Eligibility for points under this criterion will be confirmed by reference to the market study, meeting all OHFA requirements, submitted at proposal application. OHFA will rely on the market analyst?s estimation of achievable market rents as compared to achievable restricted rents to determine the affordable rent advantage. To quantify affordable rent advantage, the market study must clearly calculate and identify the following:

Affordable Rent Advantage = 1 - (achievable tax credit rents ÷ achievable market rents)* 100

  1. Bond Leveraging. Developments that will be completed in two or more phases, one of which will be a Non-Competitive HTC development. The proposal application must include a completed AHFA for the Non-Competitive HTC phase consistent with all program requirements and the current Multifamily Underwriting Guidelines. Third party reports including the market study, capital needs assessment, environmental assessment and architectural plans must encompass both phases and will be submitted at proposal application. A final application for the Non-Competitive HTC award, including all supporting documentation will be required at final application if the development is awarded a Competitive HTC allocation.

Urban Subsidy Preservation OHFA will award up to 15 points to developments that preserve a federal, project-based rental subsidy administered by HUD or USDA. Units that were not previously subsidized but received a pre-approval commitment to participate in 811 may be included in the below calculations. Proof of the subsidy must be included with the application and reflected in the AHFA. Section 9 public housing and other subsidies that are not project-based do not qualify.

Preserving HUD Subsidy –

  • Fifteen points will be awarded to developments in which 95-100 percent of the affordable units have project based rental subsidy, or preserve at least 50 subsidized units.
  • Thirteen points will be awarded to developments in which 85-94 percent of the affordable units have project based rental subsidy, or preserve at least 40 subsidized units.
  • Ten points will be awarded to developments in which 75-84 percent of the affordable units have project based rental subsidy, or preserve at least 30 subsidized units.
  • Eight points will be awarded to developments in which either 74 percent or less of the affordable units have project based rental subsidy or that involve the conversion and/or modernization housing funded through HUD programs that do not have rental subsidies.

Preserving USDA Subsidy

  • Fifteen points will be awarded to developments in which 70-100 percent of the affordable units have project based rental subsidy.
  • Thirteen points will be awarded to developments in which 50-69 percent of the affordable units have project based rental subsidy.
  • Ten points will be awarded to developments in which 25-49 percent of the affordable units have project based rental subsidy.
  • Eight points will be awarded to developments in which 24 percent or less of the affordable units have project based rental subsidy.

Urban Preservation Tiebreakers

In implementing the following tiebreakers, OHFA desires to achieve geographic parity. OHFA will skip applications where higher scoring projects in the sub-pool already satisfied the following per sub-pool allocation caps: two allocations in each of Cincinnati, Cleveland and Columbus; one allocation in each other city. If, after administering the scoring and tiebreakers, insufficient credits remain in any sub-pool to fund the next highest-scoring application, OHFA will skip to the following highest-scoring development that does not exceed the pool credit cap.

  1. Developments with 75 units or more.
  2. Developments with composite scores in the sub-pool’s top 50 percent using the formula contained in Appendix G: Tiebreaker #2 Composite Formula. All composite scores will be posted online. OHFA reserves the right to cancel the funding reservation for any proposal that alters its cost profile, unit configuration or scoring commitments at final application.
  3. Developments with the greatest number of affordable units.
  4. Developments with other funding requiring affordability restrictions beyond 30 years

Non-Urban Subsidy Preservation OHFA will award up to 15 points to developments that preserve a federal, project-based rental subsidy administered by HUD or USDA. Units that were not previously subsidized but received a pre-approval commitment to participate in 811 may be included in the below calculations. Proof of the subsidy must be included with the application and reflected in the AHFA. Section 9 public housing and other subsidies that are not project-based do not qualify.

Preserving HUD Subsidy

  • Fifteen points will be awarded to developments in which 95-100 percent of the affordable units have project based rental subsidy, or preserve at least 50 subsidized units.
  • Thirteen points will be awarded to developments in which 85-94 percent of the affordable units have project based rental subsidy, or preserve at least 40 subsidized units.
  • Ten points will be awarded to developments in which 75-84 percent of the affordable units have project based rental subsidy, or preserve at least 30 subsidized units.
  • Eight points will be awarded to developments in which either 74 percent or less of the affordable units have project based rental subsidy or that involve the conversion and/or modernization housing funded through HUD programs that do not have rental subsidies.

Preserving USDA Subsidy

  • Fifteen points will be awarded to developments in which 70-100 percent of the affordable units have project based rental subsidy.
  • Thirteen points will be awarded to developments in which 50-69 percent of the affordable units have project based rental subsidy.
  • Ten points will be awarded to developments in which 25-49 percent of the affordable units have project based rental subsidy.
  • Eight points will be awarded to developments in which 24 percent or less of the affordable units have project based rental subsidy.

Rural Preservation Tiebreakers

In implementing the following tiebreakers, OHFA desires to achieve geographic parity. OHFA will skip applications where higher scoring projects in the sub-pool already satisfied the following per sub-pool allocation caps: two allocations in each of Cincinnati, Cleveland and Columbus; one allocation in each other city. If, after administering the scoring and tiebreakers, insufficient credits remain in any sub-pool to fund the next highest-scoring application, OHFA will skip to the following highest-scoring development that does not exceed the pool credit cap.

  1. Developments with 60 units or more.
  2. Developments with composite scores in the sub-pool?s top 50 percent using the formula contained in Appendix G: Tiebreaker #2 Composite Formula. All composite scores will be posted online. OHFA reserves the right to cancel the funding reservation for any proposal that alters its cost profile, unit configuration or scoring commitments at final application.
  3. Developments with the greatest number of affordable units.
  4. Developments with other funding requiring affordability restrictions beyond 30 years.

Priorities/Evaluation Criteria

For the purposes of this QAP, Substantial Rehabilitation is determined at OHFA’s sole discretion; at a minimum, required repairs, replacements and improvements must include the following: - Development needs the replacement of the majority of two or more major building components - Involves improvements of $35,000 or more per dwelling unit for Competitive HTC or $15,000 or more per dwelling unit for Non-Competitive HTC Major components typically include structural, electrical, plumbing and HVAC. Substantial rehabilitation excludes routine maintenance. In its discretion, OHFA may remove preservation applications that did not previously submit a Non-Competitive HTC application and are not proposing substantial rehabilitation from Competitive HTC consideration and instead review them for Non-Competitive HTC eligibility.

Extended-Use

All developments must commit to an extended use period of a minimum of 30 years of affordability at the time of application. If an allocation of housing tax credits is awarded, the owner must file a Restrictive Covenant (provided by OHFA), which waives the right of the owner to petition OHFA to have the extended use period terminated as described in Section 42 of the IRC.

Developments that received a previous allocation of Competitive HTC may not compete for another allocation of Competitive HTC until the extended use period was scheduled to expire. Developments that received an early release from the extended use agreement may only compete after the original release date was originally scheduled to expire. Projects may instead seek Non-Competitive HTC, provided they can demonstrate a need for replacement of major building components which exceed the available resources in the replacement reserve accounts.

Basis-boost

Because the following development types are not financially feasible nor viable, due to lack of access to mainstream financing mechanisms available in more metropolitan areas and the increased cost burden and reduced cash-flow associated with reduced rents, they will be eligible for a 115 percent basis boost:

  • Developments competing in the Non-Urban Housing and Non-Urban Subsidy Preservation pools
  • Developments in the New Affordability pool in which 25 percent or more of units are affordable to ELI households 10
  • Developments that promote market rate integration by providing 15 percent of units that are not income restricted

Distressed Communities

Ohio’s 2018-2019 QAP offers points for neighborhood stabilization within the preservation pool. Up to 10 points will be awarded per each of the following criteria, up to 30 points:

  1. Revitalization Plan. Developments located in areas that are part of a Revitalization Plan as defined in the Revitalization Plan section above. Applicants shall submit a copy of the Revitalization Plan and proof that the development is sited within its boundaries.
  2. Change Index and Opportunity. Developments is either in a census tract designated Slight Growth or Strong Growth in the Community Change Index or in a census tract designated as High or Very-High Opportunity in the USR Opportunity Index. 3
  3. NMTC. Developments that are located within one half-mile of a state and/or Federal New Markets Tax Credit (NMTC) project site that received a NMTC allocation from a Community Development Entity (CDE) in calendar years 2014 through 2018. A copy of the commitment letter from a CDE stating that credit allocation was or will be utilized within the catchment area.
  4. Collateral Investment.
    1. Urban Areas. Developments located within one mile of real estate development and/or infrastructure investments of at least $5,000,000 completed between calendar years 2013-2017 and also located within one mile of real estate development and infrastructure investments of at least $5,000,000 planned and committed for calendar years 2018-2022.
    2. Non-urban Areas. Developments located within five miles of real estate development and/or community investments of at least $5,000,000 completed between calendar years 2013-2017 and also located within five miles of real estate development and investments of at least $5,000,000 planned and committed for calendar years 2018-2022.

Eligible investments are limited to capital improvements for residential, commercial, or infrastructure projects by government or private parties. Investments must have a clear and proximate benefit to the local residents or community. Past LIHTC investment will not be counted. OHFA retains full discretion in determining whether claimed investments meet the objectives identified in this section. For the purposes of this section, “planned and committed” means that funding is secured for the specific project. Allowable investment types include, but are not limited to constructing or physically expanding facilities, rehabilitating or renovating frontage, installing or expanding utility service, park and recreation improvements, streetscaping and erecting bus shelters. Disallowed investment types include but are not limited to social service provision or delivery, non-capital business investments, rental or operating assistance programs and road maintenance or expansion. Applicants must submit third-party supporting documentation that details and confirms the real estate development and other investment; documentation may include a letter from the local city, township or village itemizing development in the target area, newspaper articles or other appropriate documentations.

  1. Neighborhood Initiatives Program. Developments that are located in a Neighborhood Initiative Program Target Area. Applicants must submit the name of the target area and proof that the development is sited within its bounds.
  2. Non-Urban: Prevalence of Housing Problems. Non-urban developments that are located in counties where the prevalence of housing problems for households at or below 60 percent of Area Median Income (AMI) as defined by the Housing Needs Assessment is 60 percent or greater.
Revitalization

Additionally, a set-aside for revitalization area exists in the new affordability pool. A set-aside for allocation to one housing development in an area subject to a Revitalization Plan as defined in the Revitalization Plan section will be administered by OHFA. Developments sited in an eligible area will compete against like applications for the extent of the set-aside.

To qualify for a set-aside or point category related to a revitalization plan, applicants shall provide a copy of the concerted community revitalization plan (Revitalization Plan) and proof that the proposed development is located within its target area and consistent with the plan. For the purposes of this QAP, a Revitalization Plan means the same as set forth in IRC Section 42, as may be further defined by the IRS, and must include all the following components. A plan need not be specifically labeled as a “revitalization plan” or use any special language, provided it satisfies the substance of these components.

  • Scope The Revitalization Plan must include a delineated target area. It must also include an assessment of the conditions existing in the community at the time the Revitalization Plan was developed. If the Revitalization Plan is more than fifteen years old, the applicant must also provide a supplemental letter or other evidence from the plan’s administrator describing progress made towards the plan and confirming that the proposal continues to meet target area needs.
  • Community Input and OwnershipThe Revitalization Plan must have been developed through a public process. The public process may be evidenced in the Revitalization Plan or a supplemental document by any of the following:
    • Creation of the Revitalization Plan by a Community Development Corporation - Adoption or endorsement of the Revitalization Plan by the local government
    • Proof of solicitation of public and stakeholder input
    • Housing PolicyThe Revitalization Plan must include each of the following housing goals and the plans designed to accomplish them:
      • The incorporation and integration of affordable housing throughout the geographic area, including but not necessarily limited to the use of existing housing –
      • The incorporation and integration of other housing types throughout the geographic area, including but not necessarily limited to the use of existing housing
      • Other PolicyThe Revitalization Plan must address at least two of the following non-housing goals and the plans designed to accomplish them:
        • Expansion or preservation of economic activity and/or employment opportunities
        • Expansion or preservation of access to public transit
        • Improvement of schools that are accessible to residents of the target area
        • Mitigation or avoidance of adverse health conditions (such as lead-based paint hazards, environmental justice issues and crime prevention)

If the Revitalization Plan specifically incorporates, adopts or references collateral plans that meet the above requirements, OHFA will deem this section satisfied.

Implementation Measures The Revitalization Plan must include, but are not limited to, the following implementation measures: general time frames for the achievement of the above policies, potential funding sources and entities responsible for execution. A final and ratified plan need not be fully implemented or have funding sources committed. The following are not considered revitalization plans: short-term work plans, consolidated plans, municipal zoning plans, planned unit developments (PUD) or plans that OHFA determines were created exclusively for the purposes of satisfying QAP criteria. Draft plans will not be considered.

After reserving the majority of credits in each pool based on the results of the competitive scoring process, OHFA will select a final application that does not exceed the remaining credits in the pool. If there is no application that meets this objective, the remaining credits in the pool will be distributed to the Strategic Initiatives pool. Among other project types, OHFA will give priority selection consideration to Projects that assist Ohio in meeting its obligation to Affirmatively Further Fair Housing, including, but not limited to, projects that enhance mobility strategies and encourage development of new affordable housing in areas of opportunity, as well as place-based strategies to encourage community revitalization.

Contributed By: 
National Housing Trust

Other Items of Interest