The Complexity of Supportive Housing

Carla B. Pope

Director, Affordable Rental Production

Benefits of the LIHTC

• Combines both private sector and public funding partnerships

• Provides a significant amount of equity in the project (approximately 65% of total project costs)

• Is the primary federal housing programs created

• Can be used with other Federal and private funding sources

LIHTC ProcessAllocation

•QAP

•Application

•Threshold/Scoring

•9% Competitive Round

•4% Non-Competitive Tax Exempt

Bonds

Carryover Agreement 9% Credit•Official Allocating Document between IRS and State Agency

•Necessary to obtain for Syndication

•Project has 2 years to place in service•4% Credits do not have a carryover or 10% test. A letter and when bonds are sold starts 2 year period to placed in service

10% Test for 9% Credit•IRS Requirement to ensure building process can be completed within timeframe.

IRS Form 8609 Low-Income Housing Credit Allocation and Certification •Provides IRS details of project

•Part 1 Completed by State Agency•Part 2 Completed by the Ownership Entity

•Moves project from Allocation to Compliance Department

Compliance …

Compliance Process

• Household Income, Assets, & Student Status

File Compliance

• Project, Building, & Unit• UPCS (HUD Uniform Physical Condition Standards)

Physical Inspection Compliance

Initial 15 year compliance period reportable to the IRS

Extended Use Period of 15 Years

General LIHTC Requirements

• Available for use by the General Public• Must follow Fair Housing Laws• Must follow Landlord-Tenant Laws• Good cause evictions

General Public Use

• Does not fail to meet general public use solely because of occupancy restrictions or preferences that favor:– Tenants with special needs– Who are members of a specified group under

a Federal program or state program or policy that supports housing for such a specified group

Marketing of Units to General Public

• Owners must make reasonable attempts to make vacant low-income units available to the public for rent

• Should advertise the availability of vacant units using advertising methods designed to be accessible to all prospective tenants

Fair Housing Act

• Unlawful to discriminate in any aspect relating to the sale or rental of dwellings, or in the provision of services and facilities in connection with because of race, color, religion, sex, disability, familial status, or national origin (may be other state or local protected classes, such as marital status)

• May affirmatively market to a protected class; must serve all within that protected class

• Can maintain separate waiting lists

Example

• Can develop an SRO that provides supportive services to treat mental health conditions

• Cannot require a tenant to accept services• If services are mandatory, the maximum allowed rent

must include the cost of services• Can preference residency for people with disabilities,

but must allow residency to anyone with a disability (cannot restrict to those with mental illness only)

• Can select from a waiting list for people with disabilities prior to serving general public

Layering Tax Credits with Other Programs

• Need to gain compliance knowledge for all programs involved in the project.

• Use most restrictive rules from each program to meet compliance of all programs involved.

• Identify conflicts in program rules.

Non-Transient Tenancy

• Tax credit program was not designed to house the homeless on a transient basis (not a homeless shelter)

• All Leases must be 6 month in length, the only exceptions:– Transitional Housing for the Homeless

• Exclusively to facilitate transition of homeless persons. Which a non-profit or governmental programs provides support assisting such individuals in locating and retaining permanent independent housing within 24 months.

– Single Room Occupancy (SRO)• Which permit the sharing of kitchen, bathroom, and dining facilities

and at least a month-to-month lease is acceptable.

YMCA Supportive Housing

• Existing SRO no longer met fire codes and could not retain property insurance

• Location was not congruent with city’s community development efforts

• Transitional housing served men only; dormitory style with shared bathrooms; cafeteria provided meals onsite; tenants using alcohol or drugs were turned away on a daily basis

YMCA Supportive Housing

• Agency concerns– Syndication of credits– Fair Housing issues– Covering ongoing

operational costs

How YMCA Addresses Issues

• Found local investors to purchase tax credits

• Sought opinion from Fair Housing office– Must serve both men and women– Can be a dry campus, but must follow

landlord-tenant laws• Give appropriate notice if tenant fails to follow “dry”

policies (30 days notice, unless poses a risk to the safety of others)

How YMCA Addresses Issues

• Creates a privately funded rent subsidy program so that tenants do not have to pay more than 30% income towards rent

• VASH vouchers• Shelter plus care vouchers• Supportive housing program funds• Project-based Section 8 vouchers

YMCA Supportive Housing

• 140 efficiency apartments with kitchenette and bathroom in each apartment; high speed internet access is each room

• Exercise room• Laundry room• Library• Computer room• Cafeteria/Dining Room

Sources of Funds

• Private mortgage: $1,916,801 • Section 1602 grant: $5,734,458• Local housing trust fund: $50,000• Enterprise Zone Tax Credits: $145,000• Owner equity: $800,000• Investor equity (LIHTC): $5,735,000

Use of funds

• Total costs: $14,381,259– Hard construction costs: $9,531,219– Professional fees: $669,862– Interim costs: $234,000– Financing fees: $26,000– Soft costs: $169,551– Syndication costs: $75,000– Developer’s fees: $1,845,000– Operating reserve: $525,000

Debt Service

• Year One: 1.636• Year Five: 1.634• Year Ten: 1.632• Year 15: 1.331

Occupancy to Date

• As of September 1, 2011, project is 84% occupied

• Challenges: transitioning tenants from existing property to new one; students; meeting requirements of multiple subsidies while maintaining tax credit compliance

• Keys to success: Communication & Cooperation