Housing Plus

Housing Plus

Guidance and legal insight for all aspects of housing and community development

By the Housing Group at Ballard Spahr

HUD issues new guidance regarding delayed submission of RAD draft closing packages

Posted in Uncategorized

Please find below a memo issued last week by HUD’s Office of Recapitalization regarding the delayed submission of draft closing packages for RAD conversions. Please note that this gudiance applies to RCCs issued on or after May 1, 2018.


To: CHAP Awardees

From: Thomas R. Davis, Director, Office of Recapitalization

Date: April 27, 2018

Subject: Delayed Submission of Draft Closing Packages

This memo is to inform you of new guidelines for closing transactions after issuance of the RAD Conversion Commitment (RCC).  Paragraph 2.c. of the RCC requires that the RAD transaction close “within 90 days from the date executed by HUD…unless [the RCC is] extended by HUD in writing.”  When an RCC is issued, a RAD Closing Coordinator and HUD Counsel are assigned to review transaction documents and facilitate the approved closing.  At RCC issuance, the transaction should be ready to begin the closing process.  We have observed, however, that some teams do not submit their draft closing packages in a timely manner, unnecessarily diverting staff attention away from transactions that are ready to close.  Significant delays in closing may also require that a transaction be returned to the underwriting phase for an updated HUD review and issuance of a new RCC.  Recap is introducing a more standardized framework for processing transactions with a delayed submission of the draft closing package.

Recap expects a complete, generally acceptable, draft closing package to be submitted shortly after RCC issuance.  When a closing package has not been received within two months of the date the RCC was executed by HUD, the transaction will be placed in “Delayed Submission” status.  The transaction will be removed from the Closing Coordinator’s and Counsel’s workload so that HUD staff can concentrate on active RCCs.  During the period when an RCC is in Delayed Submission status, the outside parties must direct questions by email to RecapClosingTeam@HUD.gov.  This email address should also be used to notify HUD when a draft package is ready to be submitted.

After a transaction has been placed in “Delayed Submission” status, requests for extension of the RCC closing deadline will be reviewed more critically and, in the absence of evidence that the PHA is making progress towards closing the transaction, the RCC may be permitted to expire.  Any expired RCC is returned to the Financing Plan review stage.  Refreshing of any expired RCC involves, at a minimum, confirming or updating the Sources and Uses, the Pro-Forma, Financing Templates, relocation plans, and the Capital Needs Assessment (CNA).  Please note that all CNAs, including updates after an RCC has expired, must be submitted in the e-CNA format.  Expiration of the RCC and the requirement to update the underwriting does not affect the CHAP. Any changes to the CHAP or possible revocation of a CHAP will be handled separately by the Transaction Manager, consistent with Recap’s current practices.

The use of Delayed Submission status will begin with RCCs issued on or after May 1, 2018.  If you have an RCC issued prior to May 1, contact your assigned Closing Coordinator to discuss your progress towards closing and/or possible RCC expiration.

Thanks,

RAD Resource Desk

www.radresource.net

email: resourcedesk@radresource.net

IRS Announces First Wave of Opportunity Zone Designations

Posted in Uncategorized

Click here to learn more about the Qualified Opportunity Zone program and the first round of designations in a new e-alert by our Public Finance Department. For additional background, please also see previous e-alerts describing what tax incentives are available for investments in QOZs and how opportunity zones are nominated, certified, and designated.

 

 

 

 

Tax Reform – Consolidated Appropriations Act Provides Added Bonus for LIHTC Projects

Posted in Community Development, Government-Assisted Housing, Legislative Initiatives, Low Income Housing Tax Credits, Multifamily, Policy, Tax Credits, Tax Reform

On March 23, the President signed the Consolidated Appropriations Act, 2018 (H.R. 1625), a $1.3 trillion dollar spending bill that funds the federal government through September 30, 2018. In addition to preventing a government shutdown, this omnibus spending bill incorporated the following key provisions that help to strengthen and expand the Low Income Housing Tax Credit (LIHTC):

  • A 12.5% increase in the annual per capita LIHTC allocation ceiling (after any increases due to the applicable cost of living adjustment) for calendar years 2018 to 2021.
  • An expansion of the definition of the minimum set-aside test by incorporating a third optional test, the income-averaging test. Pursuant to the Code, a project meets the 40-60 minimum set aside test when 40% of the units in the project are both rent restricted and income restricted at 60% of the area median income. Under the new law, the income test is also met if the average of all the apartments within the property, rather than every individual tax credit unit, equals 60% of the area median income. Notwithstanding, the maximum income to qualify for any tax credit unit is limited to 80% of area median income.

This legislation is a great win for affordable housing advocates who have been pushing for LIHTC improvements through the Affordable Housing Credit Improvement Act, introduced in both the Senate (S. 548 sponsored by Senators Cantwell and Hatch) and the House (H.R. 1661 now sponsored by Congressmen Curbelo and Neal) in 2017, as discussed previously in a prior blog post.

We will continue to provide updates on legislation related to Tax Reform. Just in case you missed it, last month Ballard Spahr hosted a webinar on the impact of Tax Reform on the Low Income Housing Tax Credit with our colleagues from RubinBrown LLP, Enterprise Community Partners, Inc. and Red Stone Equity Partners. Presentation slides and a recording of the webinar are available on our event page.

Housing group settles FHA lawsuit alleging insurance-related discrimination against Section 8 landlords

Posted in Fair Housing, Policy, Section 8
Scale

This week, the National Fair Housing Alliance (NFHA) announced a settlement of a lawsuit against Travelers Indemnity Company in which it alleged that Travelers engaged in discriminatory conduct in violation of the Fair Housing Act (FHA).  NFHA accused Travelers of refusing to provide habitational insurance policies to District of Columbia landlords that rent to tenants who use Housing Choice Vouchers.  NFHA claimed that this policy had a disparate impact on African-Americans and women and served no legitimate business purpose. It was also alleged that the practice violated local fair housing law.

Among other provisions of the settlement, Travelers has agreed not to ask about the source of income of residents at D.C. properties that it considers insuring.  We would note that source of income discrimination is prohibited in the District of Columbia, but is not a federally protected class.

Our friends at the Ballard Consumer Finance Monitor have posted additional information about the lawsuit and the settlement.

White House Releases New Infrastructure Framework

Posted in Community Development, Legislative Initiatives, Policy

On February 12, 2018, the White House released its “Legislative Outline for Rebuilding Infrastructure in America” proposing a legislative framework for the nation’s infrastructure needs. Key components of the proposed infrastructure plan include (i) developing a new federal Incentives Program intended to spur State, local and private investment for innovate projects; (ii) streamlining permitting and approval processes for infrastructure projects; (iii) delegating increased responsibility to States and local governments; (iv) developing a Rural Infrastructure Program; and (v) improved workforce training.

As noted in the transmittal, the infrastructure framework is intentionally broad, and seeks to address traditional infrastructure systems like transportation, as well as a wider range of public needs such as drinking and wastewater systems, energy production, veterans’ hospitals, and public land use. For more detailed analysis, see Ballard Spahr’s summaries of the proposed infrastructure plan’s funding mechanisms, and the plan’s treatment of private activity bonds.

We note that the White House’s FY 2018 budget proposed significant cuts in HUD funding, including a zeroing out of public housing capital funds. There had been hope among many that the infrastructure proposal would include affordable housing, but aside from modifications to private activity bonds, it did not directly do so. It does not appear that the Administrations intends for its proposed HUD funding cuts to be addressed through infrastructure spending.

 

Advocating for increased funding for affordable housing – MAHC’s 2018 Housing Day

Posted in Budget, Legislative Initiatives, Low Income Housing Tax Credits, Multifamily

The Maryland Affordable Housing Coalition (MAHC) held its annual Housing Day in Annapolis today.   The event brings together over 200 affordable rental housing advocates to inform legislators of the value of affordable housing and funding needs to continue to develop and rehabilitate affordable housing in Maryland.  Housing Day also provides the opportunity to hear from State representatives regarding current issues and legislation related to the affordable housing industry.  During today’s program, many State elected and appointed officials emphasized the need to continue to think creatively to meet the increasing demand for affordable housing in Maryland – including the opportunity to focus on work force housing.

A priority of the 2018 Housing Day was to advocate for increased funding for Rental Housing Works (RHW), subordinate gap financing used solely for projects utilizing 4% low-income housing tax credits and Maryland Department of Housing and Community Development’s Multifamily Bond Program.  The Governor’s current budget proposes funding RHW at $20 million, but MAHC is advocating for a $5 million increase in this amount to $25 million in order to keep up with the demand for this popular financing.   MAHC notes that for every $1 invested in RHW generates nearly $11 in new public and private investments and each RHW project creates 174 jobs.  We heard from a number of elected officials regarding the value of speaking about RHW projects that have closed in their districts and the linked map provides a snapshot of the impact of RHW within each Maryland County.

Turning to the national stage, Molly Bryson, a Partner at Ballard Spahr, provided attendees of the 2018 Housing Day with an update on the need to continue to advocate for the expansion and enhancement of the federal low-income housing tax credit through the passage of the Cantwell-Hatch Affordable Housing Credit Improvement Act (S.548) in the U.S. Senate and the U.S. House of Representatives companion bill (H.R.1661 – Affordable Housing Credit Improvement Act of 2017).  The Cantwell-Hatch Act was recently included in the Senate’s initial version of the budget bill, but it unfortunately did not make it into the House’s approved budget bill.  Continued outreach is needed to keep up the momentum of this important legislation.

Ballard Spahr will continue to monitor both Maryland and federal legislation related to affordable housing and provide updates in future blog posts.

Trump Administration Releases FY 2019 Budget Proposing 18.3% Reduction in HUD Funding

Posted in Budget, Community Development, FHA and GSE Financing, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, RAD, Section 8

Yesterday, the Trump administration released its proposed budget for the 2019 fiscal year. Overall, the budget proposes an $8.8 billion (18.3%) reduction in the HUD budget from the 2017 enacted level, a more drastic cut than the $6 billon HUD budget reduction the Administration proposed for fiscal year 2018. Significant proposals in the budget include:

  • Elimination of several programs including the Community Development Block Grant (CDBG), HOME Investment Partnership Program, Public Housing Capital Fund and Choice Neighborhoods
  • $17.5 billion in Section 8 annual contribution contract renewals (an $800+ million decrease from 2017 enacted level)
  • $10.866 billion in project-based rental assistance (a $50 million increase from the 2017 enacted level)
  • $110 million decrease in Housing Choice Voucher administrative fees
  • $100 million request for the Rental Assistance Demonstration (RAD) program to cover the incremental subsidy for public housing properties that would otherwise be unable to covert to Section 8 assistance
  • Proposed elimination of the unit cap for RAD conversions and September 30, 2020 deadline for RAD application submissions
  • In addition to the elimination of the Capital Fund, $1.7 billion in reductions to the Public Housing Operating Fund
  • $75 million request for the Family Self-Sufficiency program (same as 2017 enacted level)
  • $10 million request for the Jobs Plus Initiative (a $5 million decrease from the 2018 Senate recommendation)
  • Maintained funding levels for lead-based paint mitigation efforts
  • Unspecified funding request to evaluate and improve the EnVision Centers recently launched by Secretary Carson
  • $20 million increase to the Federal Housing Administration (FHA) operations (although a new fee would be imposed on FHA lenders)
  • Requirement that non-disabled persons receiving HUD assistance contribute more than 30% of their adjusted income to their housing costs

Other housing and community development components of this budget include an elimination of the Community Development Financial Institutions (CDFI) Fund grant and direct loan program, $1.8 billion request for veteran’s homelessness programs, and a funding increase for the U.S. Department of Agriculture (USDA) single family housing guaranteed loan program. A full copy of the budget proposal and related materials are available at be www.whitehouse.gov/omb/budget.

Remember that Congress is responsible for passing the budget; this is just a proposal. It remains to be seen if Congress will adopt the President’s proposal. We will continue to provide updates the budget throughout the appropriations process.

 

Tax Reform Actualized and the Impact on Affordable Housing and Community Development

Posted in Energy Tax Incentives, Government-Assisted Housing, Historic Tax Credits, Housing Bonds, Legislative Initiatives, Low Income Housing Tax Credits, New Markets Tax Credits, Policy, Tax Credits, Tax Reform

As we know, the President has signed what was originally titled Tax Cuts and Jobs Act, the most significant overhaul to the U.S. Tax Code since 1986. The President signed the Act into law after the first of the year in order to avoid some automatic spending cuts.

In its final form, this Tax Code overhaul retains private activity bonds and the the low-income housing tax credit. However, according to A Call To Invest in Our Neighborhoods (ACTION) Campaign, the amendment of other critical provisions of the Tax Code, especially, the lowering of the corporate tax rate from 35 percent to 21 percent and the creation of a base erosion and anti-abuse tax, present concern for affordable housing, as these provisions can impact an investor’s tax credit appetite. In an analysis performed by Novogradac and Company, the final version of the bill “would reduce the future supply of affordable rental housing by nearly 235,000 homes over 10 years.” Further, it is anticipated that other changes to the Tax Code, such as those relating to bonus depreciation, depreciation, and interest expense limitations, will impact equity pricing.

The legislation also retains the new market tax credit, with no change to its expiration which is after the 2019 allocation. The 20% historic tax credit was also retained, but with significant modification, including claiming the credit ratably over 5 years.

Ballard Spahr’s Tax Group is also following the legislative developments of other provisions of the bill. Late yesterday, the Tax Group issued a thoughtful analysis of the final bill.

Please use our Tax Reform Alert Center as a resource to find more information on the bill and/or reach out to us directly.

 

 

HUD starts the rollback of affirmatively furthering fair housing?

Posted in Fair Housing, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, RAD, Section 8

Today, HUD issued a notice extending until after October 31, 2020, the deadline for cities and other participating jurisdictions to submit assessments of fair housing (AFH), the new reporting and assessment tool required by HUD’s 2015 affirmatively furthering fair housing (AFFH) rule. Some participating jurisdictions have already submitted AFHs, and the New York Times reports today that HUD says it will stop reviewing them.  Per a prior notice from HUD, AFHs for public housing authorities, states and insular areas have not yet been due.

Today’s notice reminds HUD recipients that they still must affirmatively further fair housing, but we cannot help but wonder if this is the Trump administration’s attempt to start rolling back the AFFH rule, which has been the subject of a fair amount of controversy since its publication.  The AFHs have also raised concerns for many, including PHAs concerned about the unfunded reporting burden and the potential for enforcement if goals outlined in the AFHs are not met.

HUD rolls back PACE financing in single family FHA deals

Posted in Uncategorized

In July 2016 HUD issued guidance on the use of Property Assessed Clean Energy (PACE) assessments for single family properties with FHA-insured mortgages. In January 2017, HUD followed with guidance on the use of PACE assessments for multifamily properties with certain types of FHA insurance, HUD-held debt and rental assistance.

With the issuance of Mortgagee Letter 2017-18, FHA announced that single family properties with PACE assessments will no longer be eligible for FHA-insured forward mortgages. It is unclear if HUD will extend this policy shift to multifamily properties in the future, and we will continue to monitor any action by the agency on this topic.

To learn more about the use of PACE assessments in affordable housing development, please visit www.ballardspahr.com/PACEwebinar.