The pandemic created a financial nightmare for both federal and state housing authorities: Both federal and local authorities have placed demands on modernizing, improving infrastructure, and maintaining service throughout the pandemic while facing housing authorities are a dramatic drop in sales. However, these facts provide a unique opportunity for housing authorities to innovate by working with private equity sources and leveraging the expertise and financial resources of private developers who prepare and process the federal low income tax credit application (commonly referred to as LIHTC) ). For more information you can visit at poor credit lenders like Greendayonline.
Housing authorities have a variety of options
Housing authorities have a variety of options in terms of property restructuring while property management and control continues. These private / public partnerships provide the Housing Authority with much-needed funding and create new ongoing sources of income.
At the same time, they offer their residents improved housing without burdening local taxpayers. Depending on the condition of the housing, a property may qualify for demolition and rebuilding, renovation or, if the housing authority is fortunate enough to own empty land or have the opportunity to build new development. Most developments using this structure are for skilled senior or labor housing projects, many of them near the central downtown area of the local community.
The infusion of private capital depends on the housing authority working with a private developer who assumes the financial risk of the construction.
The private developer secures the necessary tax credit investor (ie the provision of equity), construction funds, and government funds and grants that are available for such projects. I will write on this subject often because there is no question that most if not all housing authorities will have to reposition their properties using private sources of funding.
The selection of the building contractor
The selection of the building contractor as a joint venture partner by the housing authority contributes significantly to the success of the renovation. This is often a step taken without the involvement of knowledgeable legal counsel. After entering into a Memorandum of Understanding or a Development Agreement, it is generally too late to restructure key terms. While this news alert is focused on the housing authorities, the information translates well to other nonprofits, including religious organizations that are trying to develop their surplus real estate using federal low-income tax credits.
It is very important that the selected developer has the experience to identify, secure and close multiple sources of funding for each project. The selected developer must be familiar with the application process for NYS HCR, both for 4% pricing and the highly competitive 9% pricing.
If it is a federal housing authority, the housing authority should also inquire about the developer’s experience with applicable HUD regulations. Although tax credits are federally based, they are issued and administered by the state and, in the case of New York state, the NYSHCR.
Work with an experienced attorney
The first step of a housing authority is to work with an experienced attorney to prepare a call for proposals or a call for qualifications. The lawyer will advise you on the pros and cons of both. In my experience, the selected private developer must have demonstrated extensive experience with developments that include mixed funding sources, developments in residential property tax credits, tax-exempt bonds and project-based coupons as per Section 8. Sources of funding may include federal tax credits for low-income residential real estate, tax-exempt bonds, HOME funds, public housing modernization loans, federal trust fund loans, federal home loan grants, NYSERDA grants, Section 8 Housing Programs & Vouchers, and governors’ funds Office of include storm recovery.
Often times, the developer has a construction branch and a separate company set up for asset management. There are pros and cons for the builders who have an interest in the construction company, and here again, advice from a lawyer is crucial in the early steps as well as later when the closings occur. In addition, the housing authority must ensure that the selected asset manager has the necessary experience with the ongoing compliance tests of the federal government, which are very complicated.
Other relevant developer’s experience includes detailed knowledge of New York State prescribed design and construction guidelines, green building programs, and green building programs, including NYSERDA MPP, LEED, and Passive House, and M / WBE and Section 3 eligibility requirements of New York State and other sources of subsidies and real estate rescheduling after construction is complete.
When choosing a developer, the main agreement is the development agreement between the housing authority and the developer.
Lenders For The Fees
Taquin Nemec from Greendayonline says that the housing authority has the leverage to know where to look negotiate a significant percentage of the developer fees as it brings site control and the nonprofit to the table. In addition, the housing authority is usually significantly involved in obtaining the HUD and the applicable local permits. All fees and responsibilities of each party should be set out in the original agreement with the developer.
With a proven track record of public-private partnerships and the use of LIHTCs in residential development and refurbishment, all levels of government will seek to replicate and expand the use of tax credits and leverage the private markets to develop community projects. The efficient use of tax incentives will be the key to success.
Miriam R. Milgrom is a partner at Berkman, Henoch, Peterson, Peddy & Fennel.