Both federal and state housing authorities have had financial difficulties due to the epidemic: both have placed demands on modernizing, upgrading infrastructure, and sustaining service during the pandemic, while housing authorities have seen a severe decline in sales. On the other hand, these facts present a unique opportunity for housing authorities to innovate by partnering with private equity firms and leveraging private developers’ expertise and financial resources who prepare and process federal low-income tax credit applications (also known as LIHTC). Poor credit lenders know where to look such as at poor credit lenders like Greendayonline can provide extra information.
Housing authorities have some choices available to them.
While property management and control continue, housing authorities have some choices for property restructuring. These public-private partnerships give much-needed money to the Housing Authority while also establishing new long-term revenue streams.
At the same time, they provide better homes for their citizens without putting a strain on local taxpayers. A property may qualify for destruction and rebuilding, renovation, or new construction if the housing authority is lucky enough to hold empty land or have the possibility to undertake further development, depending on the state of the dwelling. Most projects that use this type are for skilled senior or worker housing, many of them located in the local community’s primary downtown area.
The infusion of private finance is contingent on the housing authority collaborating with a private developer who will carry the construction’s financial risk.
The private developer obtains the required tax credit (i.e., equity), construction capital, and government subsidies and grants. I’ll write about this topic frequently since it’s clear that most, if not all, housing authorities will have to reposition their buildings using private funds.
The choice of a construction company
The housing authority’s decision to work with the construction contractor as a joint venture partner is critical to the renovation’s success. This is frequently done without the assistance of competent legal counsel. It’s usually too late to alter important clauses after signing a Memorandum of Understanding or a Development Agreement. While this news alert focuses on housing authority, the material applies to other NGOs, such as religious groups attempting to develop surplus real estate utilizing federal low-income tax credits.
The developer chosen must have expertise in locating, securing, and closing different sources of money for each project. The chosen developer must be conversant with the NYS HCR application procedure, including the 4 percent and highly competitive 9 percent price options.
If the housing authority is a federal agency, the housing authority should additionally enquire about the developer’s familiarity with HUD requirements. Although tax credits are federally funded, they are granted and handled by the state, specifically the NYSHCR in New York.
Consult with a seasoned lawyer.
A housing authority’s initial step is to collaborate with an experienced attorney to draft a request for bids or qualifications. The lawyer will advise you on the advantages and disadvantages of both options. According to Section 8, the selected private developer must have substantial expertise with varied funding sources, developments in residential property tax credits, tax-exempt bonds, and project-based coupons, in my opinion. 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 are examples of possible funding sources.
Often, the developer will have a construction branch as well as a separate asset management organization. There are advantages and disadvantages for builders with a stake in the building firm, and legal guidance is essential both in the early stages and afterward when the closings take place. Furthermore, the housing authority must guarantee that the asset manager chosen has the appropriate experience with the federal government’s continuous compliance checks, which are quite demanding.
Other relevant developer experience includes detailed knowledge of New York State prescribed design and construction guidelines, green building programs, such as NYSERDA MPP, LEED, and Passive House, as well as M/WBE and Section 3 eligibility requirements of New York State and other sources of subsidies, as well as real estate rescheduling after construction is completed.
The development agreement between the housing authority and the developer is the most important to consider when selecting a developer.
According to Greendayonline‘s Taquin Nemec, because it brings site ownership and the nonprofit to the table, the housing authority has the leverage to know where to try to bargain a big amount of the developer costs. Furthermore, the housing authority is generally heavily involved in acquiring the HUD and any necessary municipal licenses. All fees and duties for each party should be specified in the developer’s first agreement.
All levels of government will attempt to imitate and expand the use of tax credits and use the private market to construct community initiatives, based on a proven track record of public-private partnerships and the use of LIHTCs in residential development and refurbishment. The practical application of tax incentives will be critical to success.
Miriam R. Milgrom is a partner at Berkman, Henoch, Peterson, Peddy & Fennel.