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How & Why Project-Based Vouchers

How & Why Project-Based Vouchers. Eva Tafoya, Program Analyst, OPH, HUD Terry Barnard, Tax Credit Officer, CHFA Lori Rosendahl , C.O.O., GJHA. Project-Based Vouchers HUD Regulations & Guidance. Eva Tafoya, Program Analyst, OPH, HUD. PBV - HUD. Long-term HAP contract with owner

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How & Why Project-Based Vouchers

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  1. How & Why Project-Based Vouchers Eva Tafoya, Program Analyst, OPH, HUD Terry Barnard, Tax Credit Officer, CHFA Lori Rosendahl, C.O.O., GJHA

  2. Project-Based Vouchers HUD Regulations & Guidance Eva Tafoya, Program Analyst, OPH, HUD

  3. PBV - HUD • Long-term HAP contract with owner • Assistance tied to unit, not participant • Up to 20% of voucher budget authority • Up to 25% of units within a project • Excepted: elderly, disabled, supportive services • Governed by 42 U.S.C. § 1437f(o)(13) and 24 C.F.R. Part 983 • Administrative and Annual or 5-year Plans Ref: 24 C.F.R. §§ 983.5-.6, 983.51, 983.56-.57, 983.251-259, 983.261 HUD Denver Office of Public Housing

  4. Developments • Housing and Economic Recovery Act of 2008 • Proposed rule issued May 15, 2012 • Proposed rule notes self-implementing changes • Feb. 3, 2014 letter: no retroactive waivers • PBV Guidebook: December 2014 Ref: 77 Fed. Reg. 28742 (May 15, 2012) HUD Denver Office of Public Housing

  5. Existing Housing Process HUD Denver Office of Public Housing

  6. New Construction/Rehabilitated Process HUD Denver Office of Public Housing

  7. Existing, New, Rehabilitated • Proposal selection date is key • Existing: substantially complies with HQS • Newly constructed: does not exist • Rehabilitated: exists but does not substantially comply with HQS • PBVs may not be awarded to properties in which construction has begun but before the units substantially comply with HQS Ref: 24 C.F.R. § 983.3; 77 Fed. Reg. 28742 (May 15, 2012) HUD Denver Office of Public Housing

  8. Competitive Selection • Request for proposals • Public notice • Open to proposals from multiple sites • Prior competition • PBVs may not have been considered in prior competition • Prior selection must have occurred within 3 years • Administrative Plan sets selection criteria Ref: 24 C.F.R. § 983.51 HUD Denver Office of Public Housing

  9. Before Selection Date • Units qualify for PBVs • Within budget authority and project caps • Not already under construction • Eligible units under 24 C.F.R. §§ 983.53-.54 • Compliant with civil rights law • Meets site selection standards of 24 C.F.R. § 983.57 • Review of selection process (PHA-owned) • Existing housing only: • Independent entity approval (PHA-owned) • Substantially complies with HQS (24 C.F.R. § 983.52) HUD Denver Office of Public Housing

  10. Elderly-Only Properties • May not discriminate based on familial status • Must admit elderly families with children • Units must have a 62 and older restriction to qualify as “excepted” Ref: 42 U.S.C. §§3607(b)(2), 1437a(b)(3)(B); 64 Fed. Reg. 16324 (Apr. 2, 1999) HUD Denver Office of Public Housing

  11. PHA-Owned Units: Ownership • Unit owned by the PHA administering the voucher program • “PHA” means PHA or its officers, agents, or employees • “Owned” means holding a direct or indirect interest in unit or in entity that owns the unit • Titleholder or lessee • Stockholder, member, or general or limited partner • Member of a Limited Liability Corporation Ref: 24 C.F.R. § 983.3 HUD Denver Office of Public Housing

  12. PHA-Owned Units: Selection • Review of selection process • HUD Field Office • HUD-approved independent entity • Provide documentation (selection criteria, proposals) Ref: 24 C.F.R. § 983.51(e) HUD Denver Office of Public Housing

  13. PHA-Owned Units: Rent and HQS • HUD approves independent entity • Independent entity’s duties: • Set initial rents and contract term • Conduct annual redetermination of rent • Determine reasonable rent • Perform HQS inspections • Submit reports to HUD and PHA • Appraisal required Ref: 42 U.S.C. § 1437f(o)(11), (13); 24 C.F.R. §§ 983.51, 983.59, 983.103, 983.303 HUD Denver Office of Public Housing

  14. VASH PBV Approval • All VASH PBVs require HUD approval and VA partner support • Complete selection requirements prior to seeking VASH PBV approval • Includes HUD field office approval of PHA-owned selection Ref: PIH Notice 2011-50 HUD Denver Office of Public Housing

  15. Demolition/Disposition Proceeds • Proceeds generally reserved for provision of low-income housing • Ensure PBVs are allowed before committing proceeds • If not allowed, reserve units receiving proceeds for HCV families • Do not steer HCV families to reserved units Ref: 42 U.S.C. § 1437p(a)(5)(B); 24 C.F.R. §§ 970.19, 982.352(b); PIH Notice 2012-7 HUD Denver Office of Public Housing

  16. Agreement to Enter HAP (AHAP) • Only applies to new construction and rehabilitated projects • Sets plan for construction, rents, and timing • Before AHAP execution: • Environmental review • Subsidy layering review • Must be executed prior to the start of construction Ref: 24 C.F.R. §§ 983.3, 983.58, 983.151-.156; AHAP, HUD-52531A & B HUD Denver Office of Public Housing

  17. Subsidy Layering Review • SLRs: certain new/rehabilitated projects • Any other Federal, State or local housing assistance including tax credits • PHA prepares SLR request • CHFA may conduct if project has tax credits • HUD conducts all other SLRs Ref: 42 U.S.C. § 1437f(o)(13)(M); 24 C.F.R. § 983.55; 75 Fed. Reg. 39561 (Jul. 9, 2010); PIH Notice 2013-11 HUD Denver Office of Public Housing

  18. Labor Standards • Owner, contractor, subcontractor requirements: • Employ low-income persons and program participants (Section 3) • If developing 9+ units, pay Davis-Bacon wages • Provide overtime and safe conditions • Provide equal employment opportunity • PHA may not enter HAP Contract if work did not comply with AHAP Ref: 24 C.F.R. § 983.154-.156; AHAP Part 2, HUD-52531B HUD Denver Office of Public Housing

  19. HAP Contract • Before HAP Contract execution: • Environmental review (existing) • Independent entity approval (PHA-owned new and rehabilitated projects) • Units fully comply with HQS • Initial rents set • Lowest: 110% FMR, reasonable rent, or requested rent • Maximum total term: 30 years • Sign lease/tenancy addendum at occupancy Ref: 42 U.S.C. § 1437f(o)(13); 24 C.F.R. §§ 983.58, 983.103, 983.204, 983.256, 983.301; HAP, HUD-52530A, B, & C HUD Denver Office of Public Housing

  20. Rent Calculation • Payment standards do not apply • Tenant rent = TTP – utility allowance • Utility reimbursement = utility allowance – TTP • HAP = rent to owner – tenant rent Ref: 42 U.S.C. §§ 1437f(o)(2)(C), 1437f(o)(13)(H); 24 C.F.R. §§ 983.351, 983.353 HUD Denver Office of Public Housing

  21. Other Differences from HCV • Waiting list/referral process • Participants eligible for HCV after one year • HQS: turnover and sampleannually • Different reporting in PIC 50058 and VMS • Vacancy payments Ref: 42 U.S.C. § 1437f(o)(13)(E), (J), (K); 24 C.F.R. §§ 983.103, 983.251, 983.260, 983.352 HUD Denver Office of Public Housing

  22. Changes During HAP Contract • Ownership • Modernization • Contract units • Rent Ref: 42 U.S.C. § 1437f(o)(13)(H)-(I), (K); 24 C.F.R. §§ 983.206-.207, 983.254, 983.301-.303 HUD Denver Office of Public Housing

  23. Project-Based Vouchers CHFA Role Terry Barnard, Tax Credit Officer, CHFA

  24. PBV - CHFA • Subsidy Layering Review • Review process to ensure that housing projects receiving HUD assistance do not receive excessive compensation by combining various forms of HUD program assistance (including PBVs) with assistance from other Federal, State, or local agencies. • LIHTCs fall into the definition of “other” Government Assistance --Federal Register, July 9, 2010

  25. PBV - CHFA • Subsidy Layering Review • Background • Section 102(d) of Housing and Community Development Reform Act of 1989 -- HUD Secretary must limit assistance granted to a project to “…not be more than is necessary to provide affordable housing after taking account…(Other Government Assistance).” • Section 911 of the Housing and Community Development Act of 1992 -- the requirements of 102(d) would be satisfied in connection with a project receiving assistance under a HUD program and under IRC Section 42 by certification of a housing credit agency.

  26. PBV - CHFA • Subsidy Layering Review • Background (cont’d) • Section 42 of the IRC -- authorizes LIHTC allocations to be administered by State or local housing credit agencies to encourage the development of housing for very low income tenants. • Section 42 -- requires CHFA to ensure that, “The housing credit dollar amount allocated to a development shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the development and its viability as a qualified low-income housing development through the credit period.”

  27. PBV - CHFA • Subsidy Layering Review • Background (cont’d) • 1999 – CHFA began performing subsidy layering analyses on projects in which CHFA was the lender and HUD Housing Assistance was involved, primarily, the 542(c) Risk Share Mortgage Insurance program. • >> 9 years • HERA Act of 2008 made revisions to PBV program, including delegating SLRs for projects involving PBVs and LIHTCs to State or local agencies for new construction and rehabilitated projects.

  28. PBV - CHFA • Subsidy Layering Review • Projects involving PBVs • Administrative Guidelines for conducting SLRs contained in the Federal Register Notice of July 9, 2010 • Guidelines required HCAs to submit Intent to Participate to HUD for conducting SLRs and HUD to acknowledge the HCA participation by posting the agency name on the PIH website. • HUD required to conduct SLRs for projects that do not involve LIHTCs

  29. PBV - CHFA • Tasks and Duties of a SLR • CHFA must consider the following: • All sources and uses of funds • The proceeds expected to be generated by the sale of tax credits • The reasonableness of development and operational costs of the project • The affect of operational support from the PBV subsidy to make the project feasible without overcompensation. • Operational support analysis considers the debt service coverage ratio (DCR) and the amount of cash flow generated by the project.

  30. PBV - CHFA • Tasks and Duties of a SLR • Generally, IRC Section 42 requires CHFA to make these determinations to ensure no more credit is being allocated than necessary to make the project financially feasible. • The SLR guidelines of the Federal Register Notice of July 9, 2010 are considered to be fulfilled by the IRC Section 42 review as long as the Section 42 review substantially complies with the Notice requirements. • CHFA’s LIHTC underwriting requirements, Contractor Overhead and Profit limits, and Developer Fee and Consultant Fee limits generally fulfill the requirements of both.

  31. PBV - CHFA • How CHFA conducts SLRs • CHFA’s underwriting requirements for LIHTC projects are published annually in the Qualified Allocation Plan (QAP). • CHFA’s underwriting standards and limits are as follows: • Aggregate Builder’s Profit and Overhead *percentages of hard construction costs, including new structures/rehab, onsite work, contingency, and accessory structures

  32. PBV - CHFA • How CHFA conducts SLRs (cont’d) • Aggregate Developer Fee and Consultant Fee Limits *percentages are based on total project costs net of land, developer/consultant fee category, and reserves • Vacancy rate minimum of 7% • Rent and expense trending of 2% and 3% • DCR minimum of 1.15 and maximum of 1.30

  33. PBV - CHFA • Forms and Process • Subsidy Layering Checklist

  34. PBV - CHFA • Forms and Process • Subsidy Layering Checklist • Project Name, Location • Housing Authority • Narrative Description of Project, including: • Total number of units • Type of unit, bedroom distribution • Portion and type of units receiving assistance, compliance with partial assistance requirements • Sources of Funds – CHFA provides Development Financing worksheet from LIHTC application • Uses of Funds – CHFA provides Development Budget worksheet from LIHTC application

  35. PBV - CHFA • Forms and Process • Subsidy Layering Checklist (cont’d) • Tax Credit Allocation Letter – CHFA provides • Historic Tax Credits – Sponsor provides, if applicable • Operating Proforma showing projected project income, expenses, and cash flow – CHFA provides Development Income, Development Expenses, and 15-Year Pro Forma worksheets from LIHTC application • Standard Disclosure and Perjury Statement, Identity of Interest Statement – Sponsor provides • Initial Contract Rents – Sponsor provides

  36. PBV - CHFA • Forms and Process • Subsidy Layering Checklist (cont’d) • Section 911 Certification letter – CHFA will provide letter to certify that: • The project will be receiving tax credits • The standards for General Conditions and Contractor Overhead are within approved processing allowances • The standard for Builder Profit is within the applicable limit • The standard for Developer Fee is within market limits • The PBV assistance provided by HUD to the project is not more than necessary to provide affordable housing after taking into account other government assistance • HUD Form 2880 – Applicant/Recipient Disclosure/Update Report – Sponsor provides

  37. PBV - CHFA • Forms and Process • HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

  38. PBV - CHFA • HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

  39. PBV - CHFA • HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

  40. PBV - CHFA • HUD Form 2880 – Applicant/Recipient Disclosure/Update Report

  41. PBV - CHFA • Forms and Process • If excessive funds are found during the SLR, CHFA will reduce the amount of LIHTC award to balance the sources and uses • CHFA sends complete SLR package to HUD PIH Office • PHA may not provide PBV subsidy or enter into an AHAP prior to the completion of the SLR • Once CHFA sends the package to HUD, the PHA may execute the AHAP

  42. Project-Based Vouchers PHA Perspective Lori Rosendahl, C.O.O., GJHA

  43. PBV – PHA • GJHA Admin Plan for PBV • How developed (Nan McKay?) • Basic overview of competitive process • GJHA Board and management considerations - new unit creation, rents less than FMR, special population needs • Revisions based on PBV experience

  44. PBV – PHA • Process of working with PBV applicant • How and when does GJHA commit • AHAP vs HAP • Timing and commitment issues • Environmental – who completes • Calculating 20% budget authority limit and balance with long-term PBV contracts (impacts small PHAs more significantly)

  45. PBV – PHA • PHA owned units • Notification process to HUD • Identification of independent entity • Contract Costs • Mechanics of HQS inspections, initial rent determination

  46. PBV – PHA • Overview of PBV HAP contracts implemented – strengths and weaknesses • Special considerations • Common Problem areas

  47. Questions? Thank you

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