Administrative Guidelines; Subsidy Layering Reviews for Section 8 Project-Based Voucher Housing Assistance Payments Contracts and Mixed-Finance Development, 57955-57966 [2014-22971]
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57955
Federal Register / Vol. 79, No. 187 / Friday, September 26, 2014 / Notices
gathering and maintaining the data
needed, and completing and reviewing
the collection of information.
As HUD is furnishing a significant
amount of data directly to the program
participants, the burden in completing
the Assessment Tool is reduced. Where
HUD is not providing data, as noted
earlier in this preamble, program
participants are required to consider
and in some cases utilize available local
data and local knowledge. This refers to
data already publicly available and
reasonably easy to access. This does not
refer to obscure data that may not be
known or easily found, that requires an
independent data or information
collection effort such as a local survey,
or that requires extensive analytical
expertise or staff effort for instance in
manipulating data sets or developing a
complex methodology for analyzing
complex data that may be available.
With the data that HUD provides for use
with the Assessment Tool
supplemented by available local data
and local knowledge, HUD does not
anticipate the need for any program
participant to turn to outside
consultants to collect data and conduct
the assessment.
In addition, local knowledge may be
supplemented with information
received through the public
participation process. In such cases,
program participants retain the
discretion to consider data or
information collected through this
process as well as the manner in which
it may be incorporated into the AFH,
whether in the Analysis section of the
Assessment or in Section III of the AFH
with an option to include extensive or
lengthy comments in appendices or
attachments. In short, the receipt of
extensive public comments may require
staff effort to review and consider input
but would not result in a mandate to
incur substantial additional costs and
staff hours to do so. To the contrary, the
public participation process should be
viewed as a tool to acquire additional
information to reduce burden.
The Assessment Tool is available at
https://www.huduser.org/portal/
affht_pt.html.
Information on the estimated public
reporting burden is provided in the
following table:
REPORTING AND RECORDKEEPING BURDEN
Number of
respondents
CFR Section reference
Number of
responses per
respondent
§ 5.154(d) (Assessment of Fair Housing) .............
* 4,388
1
Total Burden ..................................................
........................
Frequency of response
........................
Estimated average time for
requirement
(in hours)
Estimated
annual burden
(in hours)
200
877,600
........................
877,600
With each Con Plan or
PHA Plan.
.......................................
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* The number of respondents is based on the number of entities that will complete the version of the Assessment Tool that is the subject of
this notice and is designed for use by entitlement jurisdictions other than States and joint submissions by entitlement jurisdictions and public
housing agencies (PHAs) that are submitting a joint AFH. Entitlement jurisdictions that would use this template number 1,181. HUD is estimating
that half of the PHAs, which number in total 4053, would opt for a joint submission but this estimate, 2026, may be high.
In accordance with 5 CFR
1320.8(d)(1), HUD is specifically
soliciting comment from members of the
public and affected program
participants on the Assessment Tool on
the following:
(1) Whether the proposed collection
of information is necessary for the
proper performance of the functions of
the agency, including whether the
information will have practical utility;
(2) The accuracy of the agency’s
estimate of the burden of the proposed
collection of information;
(3) Ways to enhance the quality,
utility, and clarity of the information to
be collected; and
(4) Ways to minimize the burden of
the collection of information on those
who are to respond, including through
the use of appropriate automated
collection techniques or other forms of
information technology, e.g., permitting
electronic submission of responses.
HUD encourages not only program
participants but interested persons to
submit comments regarding the
information collection requirements in
this proposal. Comments must be
received by November 25, 2014 to
www.regulations.gov as provided under
the ADDRESSES section of this notice.
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Comments must refer to the proposal by
name and docket number (FR–5173–N–
02).
Following consideration of public
comments submitted in response to this
notice, HUD will submit for further
public comment, for a period of 30 days,
a version of the Assessment Tool that
reflects consideration of the public
comments received in response to this
notice.
Dated: September 22, 2014.
Camille E. Acevedo,
Associate General Counsel for Legislation and
Regulations.
[FR Doc. 2014–22956 Filed 9–25–14; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5417–N–02]
Administrative Guidelines; Subsidy
Layering Reviews for Section 8
Project-Based Voucher Housing
Assistance Payments Contracts and
Mixed-Finance Development
Office of the Assistant
Secretary for Public and Indian
Housing, HUD.
AGENCY:
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ACTION:
Notice.
This document provides
Administrative Guidelines (Guidelines)
which qualified Housing Credit
Agencies (HCAs) must follow in
implementing subsidy layering reviews
in accordance with the requirements of
the Housing and Economic Recovery
Act of 2008 (HERA), in those cases
where the HCA elects to conduct the
review. In certain instances, described
in this notice, HUD will follow these
Guidelines in implementing subsidy
layering reviews to satisfy the
requirements of section 102(d) of the
Department of Housing and Urban
Development Reform Act of 1989 (HUD
Reform Act). The requirements in this
notice do not supersede the subsidy
layering requirements of other Federal
programs.
This notice sets forth the guidelines
for conducting subsidy layering reviews
for mixed-finance public housing
projects and for newly constructed and
rehabilitated structures combining other
forms of government assistance with
project-based voucher assistance under
section 8 of the United States Housing
Act of 1937 (1937 Act).
SUMMARY:
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Federal Register / Vol. 79, No. 187 / Friday, September 26, 2014 / Notices
Luci
Ann Blackburn, Urban Revitalization
Division, Office of Public and Indian
Housing, Department of Housing and
Urban Development, 451 7th Street SW.,
Room 4134, Washington, DC 20410;
telephone number 202–402–4190 (this
is not a toll free number); or Miguel A.
Fontanez Sanchez, Director, Housing
Voucher Financial Management
Division, telephone number 202–402–
FOR FURTHER INFORMATION CONTACT:
4212 (this is not a toll free number).
Individuals with speech or hearing
impairments may access this number
through TTY by calling the toll free
Federal Relay Service at 800–877–8339.
SUPPLEMENTARY INFORMATION:
I. Background
A. Summary Chart
The remainder of this notice describes
the current requirements regarding
subsidy layering reviews for different
development scenarios. The current
legal requirements and HUD’s policy,
which are more fully described in this
notice, are summarized for ease of
reference in the following chart:
Type of project
SLR reviewer
Certification required under section 102(d) of the HUD
Reform Act
PBV (without LIHTC), New Project ...................................
PBV only (without LIHTC), Existing Project .....................
PBV with LIHTC ................................................................
HUD ....................................
SL Review not required ......
HCA 1 or HUD ....................
PBV with LIHTC and Mixed Finance ................................
Mixed Finance without LIHTC ..........................................
Mixed Finance with LIHTC ...............................................
Mixed Finance with LIHTC/No HCA or HCA declines to
do review.
HCA 3 or HUD ....................
HUD ....................................
HCA 4 or HUD ....................
HUD ....................................
Yes.
No.
If the HCA were to do the review, and the HCA’s SL
Review took into account proposed PBV assistance,
certification would not be required.2 Otherwise, HUD
must certify.
Yes.
Yes.
Yes, by entity performing review.
Yes.
B. The Housing and Economic Recovery
Act of 2008 (HERA)
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HERA (Pub. L. 110–289, approved
July 30, 2008) made numerous revisions
to the Section 8 Project-Based Voucher
program. On November 24, 2008, at 73
FR 71037, HUD published a Federal
Register notice to provide information
about HERA’s applicability to HUD’s
public housing and Section 8 tenantbased and project-based voucher
programs. That notice provided an
overview of key provisions of HERA
that affect HUD’s public housing
programs, and identified those
provisions that are self-implementing,
requiring no action on the part of HUD
for participants to commence taking
action to be in compliance, and those
provisions that require implementing
regulations or guidance on the part of
HUD. That notice also stated that HUD
would be issuing implementing
guidance on section 8(o)(13)(M)(i) of the
1937Act (42 U.S.C. 1437f(o)(13)(M)(i)),
as applicable to newly constructed or
rehabilitated housing. (See 73 FR
71039.)
On July 9, 2010, at 75 FR 39561, HUD
published a Federal Register notice
stating the guidelines HCA’s must use in
conducting subsidy layering reviews for
newly constructed and/or rehabilitated
1 It should be noted that, at the time of
publication of this Notice, HUD is doing the
subsidy layering reviews in all types of cases,
including in mixed-finance projects with LIHTC.
2 Even though not required by HERA, HUD in
practice requires certifications in these cases.
3 See footnote 1.
4 See footnote 2.
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structures combining other forms of
government assistance with projectbased voucher assistance. These notices
state that the HERA provision relating to
the elimination of subsidy layering
reviews for existing housing is selfimplementing; the provision relating to
State or local agencies performing
subsidy layering reviews for projectbased voucher housing assistance
payment (HAP) contracts for new
construction and rehabilitated projects
is not self-implementing. This notice
restates and updates these prior notices,
including specific guidelines related to
subsidy layering and low-income
housing tax credit (LIHTC).
C. Rental Housing Policy Alignment
Through the work of the Rental
Housing Policy Alignment team, an
outgrowth of the Interagency Rental
Policy Working Group formed in 2011,
various workstreams are currently
underway to streamline government
oversight and align standards across
federal agencies providing funding for
affordable rental housing.5 One of these
workstreams is the Subsidy Layering
Review group, which seeks to provide a
template for agencies within a State to
share duties and information related to
approval and review of federally-funded
affordable housing. A pilot program
aiding the signing of Memoranda of
Understanding between various State
and federal agencies providing
affordable housing assistance was
5 See https://www.whitehouse.gov/blog/2011/02/
01/urban-update-aligning-federal-rental-housingpolicy.
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conducted successfully across seven
states in 2012,6 and HUD intends to
publish a guidebook that will allow all
agencies that wish to enter into such an
agreement to do so. This notice provides
guidance and updates on how and in
what situations such agreements can be
utilized to reduce the burden of subsidy
layering review on government
agencies.
D. Section 102 of the HUD Reform Act
and Other Authorities
HUD’s regulations in 24 CFR part 4
implement section 102(d) of the HUD
Reform Act (42 U.S.C. 3545(d)) and
contain a number of provisions
designed to ensure greater
accountability and integrity in the way
in which HUD makes assistance
available under certain of its programs.
Section 4.13 of 24 CFR (Limitation of
assistance subject to section 102(d))
requires HUD to certify, in accordance
with section 102(d) of the HUD Reform
Act, that assistance made available by
HUD for a specific housing project will
not be more than is necessary to make
the assisted activity feasible after taking
into account assistance from other
government sources. In order to make
that certification, a subsidy layering
review must be performed. In addition,
The Housing and Community
Development Act of 1992 (Pub. L. 102–
550, approved October 28, 1992), as
amended by the Multifamily Housing
6 See https://www.huduser.org/portal/pdredge/
pdr_edge_featd_article_012612.html.
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Property Disposition Reform Act of 1994
(Pub. L. 103–233, approved April 4,
1994) added a ‘‘Subsidy Layering
Review’’ provision at 42 U.S.C. 3545
note, which states that the subsidy
layering requirement for projects
receiving assistance under a HUD
program and receiving tax credits may
be satisfied ‘‘by a certification by a
housing credit agency to the Secretary,
submitted in accordance with
guidelines established by the Secretary,
that the combination of assistance
within the jurisdiction of the Secretary
and other government assistance
provided in connection with a property
for which assistance is to be provided
within the jurisdiction of the
Department of Housing and Urban
Development and under section 42 of
the Internal Revenue Code of 1986 shall
not be any greater than is necessary to
provide affordable housing.’’ This
statutory note also sets requirements for
equity capital and project costs. Finally,
as noted, in 2008, HERA altered some of
these subsidy layering requirements.
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• Project Based Assistance But No
LIHTC
Section 2835 of HERA adds
subparagraph (M) to section 8(o)(13) of
the U.S. Housing Act of 1937, 42 U.S.C.
1437(o)(13), which provides that a
subsidy layering review shall not be
required for project-based assistance (1)
for an existing structure, or (2) if a
subsidy layering review has been
conducted by the applicable State or
local agency. However, this section does
not speak to the case where HUD
conducts the review, hence that
situation is governed by other
applicable law, specifically, section
102(d) of the HUD Reform Act, 42
U.S.C. 3545(d), which requires that the
Secretary certify that assistance within
the jurisdiction of the Department
(except that Title II mortgage insurance
for this purpose is not considered such
assistance) to any housing project shall
not be more than is necessary to provide
affordable housing after taking account
of assistance described in subsection
(b)(1) of this section. Assistance under
(b)(1) includes ‘‘any related assistance
from the federal government, a State, or
a unit of general local government, or
any agency or instrumentality thereof.’’
• HUD Assistance Plus LIHTC
As noted, 42 U.S.C. 3545 note
provides that an HCA certification
submitted in accordance with HUD
guidelines will suffice in lieu of a HUD
review when HUD assistance and
LIHTC are used in a project. Where
there is no current delegation of subsidy
layering review authority to an HCA, on
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a case-by-case basis, and within its sole
discretion, HUD may delegate the
subsidy layering review activity to a
local HCA subject to HUD’s review
under 42 U.S.C. 3545 note and these
guidelines. In such cases, HUD may
request the HCA to make changes to the
subsidy layering review or HUD may
revise the HCA’s subsidy layering
review as needed. Id.
• Mixed-Finance and Public Housing
Without LIHTC
It is also possible for mixed-finance
arrangements to occur with other forms
of federal assistance, but without
LIHTC. In regard to such mixed-finance
and public housing, the applicable law
is again section 102(d) of the HUD
Reform Act, and HUD is responsible for
performing subsidy layering reviews.
II. Certification
A. HUD’s Certification Requirements
Pursuant to 102(d) of the HUD Reform
Act
HUD’s regulation at 24 CFR 4.13
states that before HUD makes any
assistance subject to section 102(d),
with respect to a housing project for
which other government assistance is,
or is expected, to be made available,
HUD will determine, and execute a
certification, that the amount of the
assistance is not more than is necessary
to make the assisted activity feasible
after taking account of the other
government assistance. This review
certifies that there are no duplicative
government subsidies when combining
HUD housing assistance and forms of
other federal, State, or local government
assistance. Where an HCA has
performed a subsidy layering review for
a project that has been allocated LIHTCs
and the subsidy layering review took
into consideration the proposed projectbased voucher assistance, section
2835(a)(1)(F) of HERA eliminates the
need for the HUD Reform Act’s section
102(d) certification requirement.
However, HUD’s obligation to certify in
accordance with 102(d) of the HUD
Reform Act and implementing
regulations at 24 CFR 4.13 still exists
where a review has not been substituted
in accordance with the Guidelines
contained in this notice.
1. HCA Participation Where LIHTC
Administered by the HCA Is Involved
An HCA is ordinarily designated for
the purpose of allocating and
administering the LIHTC program under
section 42 of the Internal Revenue Code
(IRC), and so may do the subsidy
layering review pursuant to
authorization under this notice where
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57957
there is LIHTC. In those transactions
where there are other forms of
government assistance involved, as in
proposed project-based voucher
projects, which do not include LIHTC,
and the HCA has no involvement in
respect to the assistance, HUD will
generally conduct subsidy layering
reviews and make the required HUD
Reform Act’s section 102(d) certification
in accordance with 24 CFR 4.13 for such
projects as it is currently doing. HUD
will also continue to conduct the review
where there is no HCA available, or the
applicable HCA has declined to perform
the subsidy layering review.
2. HCA Participation Where Other
Assistance Administered by the HCA
May Be Involved
Currently, transactions involving
LIHTC are the only case where the HCA
has substantial involvement and, absent
a waiver requested by the locality and
granted by HUD for good cause, are
generally the only case where the HCA
performs the subsidy layering review.
However, in the future, Congress may
appropriate forms of assistance where
there is involvement by a local HCA. In
those cases, HUD may, by notice
published in the Federal Register, on
such terms and conditions as HUD may
provide, and where not contrary to
statutory authority, delegate
performance of the subsidy layering
review to the local HCA.
B. HCA Certification Under HERA
Under section 8 of the 1937 Act,
specifically at 42 U.S.C. 1437f(o)(13)(M),
the HUD Reform Act section 102(d)
certification is not required with respect
to project-based assistance, or if a
subsidy layering review has been
conducted by the applicable HCA.
These Guidelines require that HCAs
make an initial certification to HUD
when the agency notifies HUD of its
intent to participate. The HCA
certification provides that the HCA will,
among other things, properly apply the
Guidelines which HUD establishes. In
addition, after a subsidy layering review
has been performed by the applicable
HCA, the HCA must certify that the total
assistance provided to the project is not
more than is necessary to provide
affordable housing (Appendix B of this
notice).
III. Intent To Participate
An HCA must notify HUD of its intent
to participate in the preparation of
subsidy layering reviews for projects
combining other forms of government
assistance with project-based voucher
assistance before performing subsidy
layering reviews pursuant to this notice.
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Questions or requests for clarification
relating to subsidy layering reviews for
units under the project-based voucher
program and the implementation of
these Guidelines should be addressed to
HUD Headquarters, Section 8 Financial
Management Division, and should be
answered prior to an HCA’s notification
to HUD of its intent to participate.
A. Letter to HUD
An interested HCA shall notify HUD
of its intent to perform subsidy layering
reviews for newly constructed and
rehabilitated projects that will receive
project-based voucher assistance by
sending a brief letter (Appendix A of
this notice), executed by an authorized
official of the HCA informing HUD that
it: (1) Has reviewed these Guidelines; (2)
understands its responsibilities under
these Guidelines; and (3) certifies that it
will perform the subsidy layering
review as it relates to project-based
voucher assistance in accordance with
all statutory, regulatory and Guideline
requirements. Such letters should be
forwarded via email to the Section 8
Financial Management Division at HUD
Headquarters at the following address:
pih.financial.management.division@
hud.gov.
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B. HUD Acknowledgement
Once HUD has been notified of an
HCA’s intention to participate, HUD
will acknowledge that participation by a
written letter to the HCA, and post the
agency’s name on the Office of Public
and Indian Housing’s Web site as a
participating agency. Once an HCA’s
intent to participate is acknowledged by
HUD through a response letter, that
agency may perform subsidy layering
reviews, and certify such reviews have
been performed, on behalf of proposed
project-based voucher HAP contracts for
newly constructed or rehabilitated units
in accordance with the HCA’s existing
requirements, provided such
requirements are in substantial
compliance with these Guidelines.
C. Revocation of Participation
If HUD determines that an HCA has
failed to substantially comply with
these Guidelines, or statutory or
regulatory requirements, HUD may
discontinue the HCA’s permission to
perform subsidy layering reviews on
behalf of proposed project-based
voucher HAP contracts. HUD will
inform the HCA in writing of such a
determination.
D. HUD Participation
HUD will follow these Guidelines in
conducting the required subsidy
layering reviews, and issue a HUD
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Reform Act section 102(d) certification
pursuant to such review for projects in
cases where: (1) The HCA’s authority
has been revoked by HUD; (2) an HCA
opts to not accept the responsibilities
pursuant to section 2835(a)(1)(F) of
HERA; (3) project-based voucher
assistance is combined with other
government assistance that does not
include LIHTCs, and the HCA does not
have the authority to conduct such
review; or (4) the project is mixed
finance.
E. Applicability
These guidelines apply to any
contract, grant, loan, cooperative
agreement, or other form of assistance,
including the insurance or guarantee of
a loan or mortgage that is provided
under a program administered by HUD
for use in, or in connection with, a
specific housing project. Assistance
provided under section 8(o)(13) of the
1937 Act (42 U.S.C. 1437f) (projectbased vouchers) for new construction or
rehabilitated projects is assistance to
which section 102(d) of the HUD
Reform Act applies for subsidy layering
review purposes.
IV. Definitions
Category 1 subsidy layering review—
Subsidy layering review for proposed
project-based voucher HAP contracts
where the HCA conducts the review,
with consideration of project-based
voucher assistance.
Category 2 subsidy layering review—
Subsidy layering review for proposed
project-based voucher HAP contracts
where the HCA conducts the review, but
without consideration of project-based
voucher assistance.
Housing Credit Agency (HCA)—For
purposes of performing subsidy layering
reviews for proposed project-based
voucher projects, a housing credit
agency includes a State housing finance
agency, a participating jurisdiction
under HUD’s HOME Investment
Partnerships program (see 24 CFR part
92), or other State housing agencies that
meet the definition of ‘‘housing credit
agency’’ as defined by section 42 of the
Internal Revenue Code of 1986. Any
agency for which HUD has previously
acknowledged its participation and
posted the agency’s name on the Office
of Public and Indian Housing’s Web site
as a participating agency prior to the
effective date of this notice is also
considered to be an HCA for purposes
of performing subsidy layering reviews,
except where HUD has revoked the
HCA’s authority to perform subsidy
layering reviews.
Mixed-finance development—Mixedfinance development refers to the
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development (through new construction
or acquisition, with or without
rehabilitation) or modernization of
public housing pursuant to 24 CFR
905.604, where the public housing units
are owned in whole or in part by an
entity other than a PHA. There are
various potential scenarios for the
ownership structure of a mixed-finance
project, such as: Public housing units
may be owned entirely by a private
entity; a PHA may co-own with a
private entity; or a PHA affiliate or
instrumentality may own or co-own the
units.
Other government assistance is
defined to include any loan, grant,
guarantee, insurance, payment, rebate,
subsidy, credit, tax benefit, or any other
form of direct or indirect assistance
from the federal government, a State, or
a unit of general local government, or
any agency or instrumentality thereof.
Substantial compliance —For
purposes of making the HERA
certification, an HCA may perform
subsidy layering reviews for proposed
project-based voucher HAP contracts for
newly constructed and rehabilitated
units in accordance with the HCA’s
existing requirements, provided such
requirements are in substantial
compliance with these Guidelines. To
be in substantial compliance, the HCA’s
guidelines shall be at least as stringent
as these Guidelines, and require
equivalent disclosures from the
ownership entity.
V. Public Housing Agencies (PHA)
Responsibilities
A. When Subsidy Layering Reviews Are
Required
When a new construction or
rehabilitation project has been selected
by a PHA pursuant to program
regulations at 24 CFR part 983 and the
project combines other forms of
governmental assistance, the PHAs must
request a subsidy layering review. As
part of the selection process, the PHA
must require information regarding all
HUD and/or other federal, State, or local
governmental assistance to be disclosed
by the project owner. Form HUD–2880 7
(Appendix C of this notice) may be used
for this purpose, but is not required. The
PHA must also instruct the owner to
complete and submit a disclosure
statement even if no other governmental
assistance has been received or is
anticipated. The statement must be
submitted with the owner’s application
for project-based vouchers. The PHA
must also inform the owner that if any
information changes on the disclosure,
7 See https://portal.hud.gov/hudportal/documents/
huddoc?id=2880.pdf.
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either by the addition or deletion of
other governmental assistance, the
project owner must submit a revised
disclosure statement. If before or during
the HAP contract, the owner receives
additional HUD or other governmental
assistance for the project that results in
an increase in project financing in an
amount that is equal to or greater than
10 percent of the original development
budget, the owner must report such
changes to the PHA and the PHA must
notify the HCA, or HUD (if there is no
participating HCA in their jurisdiction),
that a further subsidy layering review is
required.
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B. Requesting Performance of Subsidy
Layering Reviews
The PHA must request a subsidy
layering review through the
participating HCA. A list of
participating HCAs will be posted on
HUD’s Office of Public Housing’s Web
site and updated periodically. If an HCA
is not designated in the PHA’s
jurisdiction, the PHA should contact its
local HUD field office. The PHA will be
informed if there is in fact an HCA in
their jurisdiction that will conduct the
review or if the PHA must submit the
required documentation to its local
HUD field office. The local field office
will request HUD Headquarters to
conduct the subsidy layering review.
C. Providing Documents Required for
Review
The PHA is responsible for collecting
all required documentation from the
owner. The documentation required is
contained within Appendix D of this
notice. The PHA is also responsible for
providing the HCA with all documents
required for the subsidy layering review.
The documents must be forwarded to
the HCA with a cover letter. If the initial
submission to the HCA is incomplete,
the HCA is in need of further
documentation, or if new information
becomes available, the PHA must
provide the documentation to the HCA
during the review process.
The PHA should contact the HCA to
determine whether any documents the
PHA is required to provide are already
in the possession of the HCA. If the
most recent copies of documents the
PHA has collected from the owner are
already in the HCA’s possession, the
PHA must state in its cover letter to the
HCA which documents are not included
because the HCA has informed it that
the documents are already in the HCA’s
possession. The PHA must still
maintain a complete set of the required
documents with the project file for
quick reference by either HUD or the
PHA.
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57959
D. Subsidy Layering Review Timing and
Outcome
VI. Subsidy Layering Review
Categories—Overview
In accordance with program
regulations at 24 CFR 983.55, a PHA
may not provide project-based voucher
assistance until after the required
subsidy layering review has been
performed in accordance with these
Guidelines. Therefore, before entering
into an Agreement to Enter into Housing
Assistance Payments Contract (AHAP),
the PHA must await the outcome of the
subsidy layering review. All other preAHAP requirements must also be
satisfied before AHAP execution (e.g.,
environmental review). If the HCA with
jurisdiction over the project has
conducted the subsidy layering review,
the HCA must certify to HUD that the
project-based voucher assistance is in
accordance with HUD subsidy layering
requirements. The HCA must provide a
copy of the certification to the PHA to
signify to the agency that the subsidy
layering review has been completed and
a determination has been made that the
project-based voucher assistance does
not result in excessive government
assistance. The PHA may proceed to
execute an AHAP at that time.
If the subsidy layering review results
in excessive public assistance, the HCA
will notify HUD, in writing, with a copy
to the PHA, of the outcome. The
notification will include either a
recommendation to reduce the LIHTC
allocation, proposed amount of projectbased voucher assistance, or other
assistance, or a recommendation to
permanently withhold entering into an
AHAP for the proposed project. HUD
will consult with the HCA and the PHA
prior to issuing its final determination
either adopting the HCA’s
recommendation or revising the
recommendation. Once the PHA
receives HUD’s final decision, the PHA
must notify the owner in writing of the
outcome.
If HUD conducts the review, HUD is
responsible for making the required
HRA section 102(d) certification
pursuant to 24 CFR 4.13. If it is
determined that the project-based
voucher assistance does not result in
excessive government subsidy, HUD
will notify the PHA in writing. If it is
determined that combining housing
assistance payment subsidy under the
project-based voucher program with
other governmental assistance results in
excessive public assistance, HUD will
require that the PHA reduce the level of
project-based voucher subsidy or inform
the owner that the provision of projectbased voucher assistance shall not be
provided.
A. Category 1—Proposed Project-Based
Voucher HAP Contracts Where the HCA
Conducts the Subsidy Layering Review
and Considers Project-Based Voucher
Assistance
Section 8(o)(13)(M)(i) of the 1937 Act
(42 U.S.C. 1437f(o)(13)(M)(i)), as added
by section 2835(a)(1)(F) of HERA,
provides that a subsidy layering review
in accordance with section 102(d) of the
HUD Reform Act is not required if a
subsidy layering review has been
conducted by a qualified HCA (of
course, HUD retains the option to
conduct the review itself). Section
42(m)(2) of the IRC (26 U.S.C. 42(m)(2))
mandates that HCAs ensure that the
amount of housing tax credit awarded to
a project is the minimum amount
necessary for the project to be placed-inservice as affordable rental housing. As
part of its section 42(m)(2) review, the
HCA considers all federal, State, and
local subsidies which apply to the
project. In making the determination
that the LIHTC dollar amount allocated
to a project does not exceed the amount
the HCA determines is necessary for the
financial feasibility of the project, the
HCA must evaluate and consider the
sources and uses of funds and the total
financing planned for the project, the
proceeds expected to be generated by
reason of the LIHTC, the percentage of
the LIHTC dollar amount used for
project costs, and the reasonableness of
the developmental and operational costs
of the project. The subsidy layering
review Guidelines under this notice are
similar to those required under the IRC
section 42(m)(2) review.
The amendment made to the
requirements of HUD Reform Act
section 102(d) pursuant to section
2835(a)(1)(F) of HERA (for purposes of
project-based voucher assistance),
codified at 42 U.S.C. 1437f(o)(13)(M)(i),
alleviates the duplication of subsidy
layering reviews (that consider the same
factors for the same reasons) by both
HUD and HCAs. The only other review
element that an HCA must consider
with the addition of project-based
voucher assistance to a proposed
project, is the effect the operational
support provided by the project-based
vouchers will have on the HCA’s
analysis in regards to the level of
subsidy required to make the project
feasible without over-compensation.
HCAs must therefore analyze the
operating pro-forma that reflects the
inclusion of the project-based voucher
assistance as part of the subsidy layering
review process. The operational support
analysis will consider the debt coverage
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ratio (DCR) and the amount of cash-flow
generated by an individual project to
determine if excess funding exists
within the total development budget.
In light of the above, when a proposal
for project-based voucher assistance is
contemporaneous with the application
for, or award of, LIHTCs, the subsidy
layering review required by these
Guidelines may be fulfilled by the IRC
section 42(m)(2) review if such review
substantially complies with the subsidy
layering review requirements under this
notice. The Department expects that in
most cases it will. If the IRC section
42(m)(2) review substantially complies
with the requirements of a subsidy
layering review under this notice, the
HCA may make the required
certification (Appendix B of this notice)
to HUD without conducting an
additional subsidy layering review
pursuant to these Guidelines. If the HCA
cannot make the required certification
because the operation pro-forma was not
reviewed as part of its IRC section
42(m)(2) review in the manner required
by these Guidelines, the HCA must
perform the limited review as described
in section VIII.B of this notice and, if
necessary, reduce the subsidy source
within its control (i.e., the total tax
credit allocation amount) or promptly
notify HUD of a recommendation to
reduce the project-based voucher units
or subsidy.
Where HUD conducts the review, for
the reasons previously stated, in
addition to evaluating the operational
budget, HUD must analyze whether
certain development costs (specifically
general condition, over-head, profits,
and developer’s fee) are or were
excessive. If it is determined that such
costs are excessive, HUD will reduce the
amount of project-based voucher
assistance to a level that will sustain the
project’s viability without
overcompensation. HUD will notify the
PHA before any action to reduce the
project-based voucher units due to
issues of overcompensation.
operational aspects of the project in
accordance with Section VIII.B of this
notice.
Although project-based voucher
projects are exempted from a full
subsidy layering review, the HCA must
still be able to certify when combining
HUD and other governmental assistance,
including project-based voucher
assistance, that the project is not
receiving excessive compensation. The
HCA will be able to make this
certification if the review performed as
required by section 42(m)(2) of the IRC
substantially complied with these
Guidelines. In addition to ensuring
there is no excessive subsidy, the review
must also consider whether there are
any duplicative forms of assistance (i.e.,
rental assistance from some other state,
federal or local source). If it is found
that there is duplicative rental
assistance for the same unit, the unit
does not qualify for project-based
voucher assistance, and the HCA must
apprise the PHA of such finding. For
purposes of this analysis, LIHTC units
are not considered duplicative rental
assistance.
B. Category 2—Proposed Project-Based
Voucher HAP Contracts Where the HCA
Conducts the Subsidy Layering Review
Without Consideration of Project-Based
Voucher Assistance
Where a subsidy layering review has
been conducted by an HCA on a
proposed project-based voucher project
for purposes of allocating LIHTCs which
may have also included other forms of
government assistance, but such review
did not consider project-based voucher
assistance (e.g., project-based vouchers
were obtained subsequent to the LIHTC
allocation), the HCA may conduct a
limited review with an emphasis on the
Subsidy layering reviews are required
prior to the execution of an AHAP for
new construction and projects that will
undergo rehabilitation, if the project
combines project-based voucher
assistance with other governmental
assistance. When an HCA has
conducted a subsidy layering review in
connection with the allocation of
LIHTC, the standards used by the HCA
must substantially comply with these
Guidelines. When HUD is conducting
the subsidy layering review it will
follow these Guidelines and use the
Subsidy Layering Analysis form
(Appendix E of this notice).
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19:14 Sep 25, 2014
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C. Category 3—Mixed-Finance Public
Housing Projects
Under HUD’s mixed-finance
regulations, subsidy layering review
must be conducted by HUD or its
designee (e.g., the HCA) pursuant to
section 102(d) of the HUD Reform Act
(42 U.S.C. 3545(d)). HUD is responsible
for subsidy layering reviews for mixedfinance and public housing
development projects. On a case-by-case
basis, and within its sole discretion,
HUD may delegate the subsidy layering
review activity to a local HCA subject to
HUD’s review. In such cases, HUD may
request the HCA to make changes to the
subsidy layering review or HUD may
revise the HCA’s subsidy layering
review as needed.
VII. Subsidy Layering Review
Guidelines—Procedural Description
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A. Maximum Allowable Amounts
Maximum Allowable Amounts are
those that cannot be exceeded under
any circumstances. If values provided
by the project owner exceed the
maximum allowable amounts,
reductions must be made in either the
proposed amount of project-based
voucher assistance, or the LIHTC equity
to bring the values below the maximum
allowable amounts before the HCA can
make its certification to HUD, and,
where HUD is performing the review,
before the HRA section 102(d)
certification can be made. In the case of
LIHTC syndication proceeds, if the
values provided by the project owner
are lower than the minimum LIHTC
price, the PHA shall not enter into an
AHAP with the owner unless the LIHTC
allocation is reduced to bring the value
of the tax credits at or above the
minimum LIHTC price.
B. Safe Harbor Standards
Safe harbor standards are generally
applicable development standards.
Although the safe harbor standards can
be exceeded under certain
circumstances, projects for which the
owner’s documented development costs
and fees are within the safe harbor
standards can move forward without
further justification. If any of the
owner’s costs and/or fees exceed the
safe harbor limits, but are within the
maximum allowable amount, additional
justification and documentation are
required.
Between the safe harbor standard and
the maximum allowable amounts for
each of the factors considered in the
review is a range in which values may
be acceptable if they are justified based
on project size, characteristics, location,
and risk factors. Additional
documentation must be requested from
the project owner that demonstrates the
need for values that exceed the safe
harbor standards. If the review is being
conducted by an HCA, instead of HUD,
project costs exceeding the safe harbor
standards must be consistent with the
HCA’s published qualified allocation
plan. Under no circumstances may costs
exceed the total maximum allowable
amounts.
For all projects falling within
Category 1, the reviewer (either an HCA,
or HUD) must evaluate development
costs to determine whether predevelopment cost associated with the
construction of the project is within a
reasonable range, taking into account
project size, characteristics, locations
and risk factors; and whether over-head,
builder’s profit and developer’s fee are
also within a reasonable range, taking
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into account project size, characteristics,
locations and risk factors.
2. When Development Costs Exceed the
Safe Harbor Standard
VIII. Subsidy Layering Reviews—
Guidelines and Requirements
If the costs for builder’s profit, or
developer’s fee, exceed the safe harbor
values without satisfactory
documentation for the need for higher
costs, either the HCA or HUD will take
the actions outlined below:
A. Category 1 Subsidy Layering Reviews
For Category 1 projects, HCAs will
review all proposed sources and uses of
funds. HCAs will also consider all
loans, grants, or other funds provided by
parties other than HUD and will assess
the reasonableness of any escrow or
reserve (i.e., maintenance, operational,
and replacement reserves) proposed for
the project, taking into account project
size, project characteristics, project
location and project risk factors, as
determined by the HCA, even if such
reserves do not affect the amount of
subsidy allowed under applicable
program rules.
1. Safe Harbor Percentage Allowances
HCAs will use the following safe
harbor standards which HUD has
established for subsidy layering analysis
purposes for project-based voucher HAP
contracts: The percentage allowances
may be negotiated between the safe
harbor and maximum allowable
amounts with the project sponsor and
the individual HCAs to reflect their
assessment of the market and to respect
their qualified allocation plan. Any
approved fees that exceed safe harbor
amounts must be justified by special
circumstances, such as market
conditions or other circumstances that
HUD may determine.
a. Standard (1)
General Condition: safe harbor—six
percent (6%) of construction contract
amount.
c. Standard (3)
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Builder’s Profit: safe harbor—six
percent (6%) of construction contract
amount.
The total allowed or allowable Safe
Harbor percentages for General
Conditions, Overhead, and Builder’s
Profit are based on hard construction
costs and the maximum combined costs
shall not be more than fourteen percent
(14%) of the hard construction cost.
d. Standard (4)
Developer’s fee: safe harbor—twelve
percent (12%) of the total development
cost (profit and overhead).
The maximum allowable developer’s
fee is fifteen percent (15%) of the
project costs (profit and overhead).
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b. HUD Performing Review
Where HUD is performing the review
and it is determined that, after
evaluating allowable sources and uses,
the combination of assistance will result
in excessive subsidy, HUD will reduce
the proposed amount of project-based
voucher assistance.
3. When Development Costs Are Within
Safe Harbor
If all safe harbor standards are met,
the HCA must examine the effect
project-based voucher assistance will
have on the operation’s pro-forma before
making its LIHTC allocation. If the safe
harbor and operational standards
(discussed below) are met, the HCA
must submit its certification to HUD
with a copy to the applicable PHA along
with its sources and uses statement. If
HUD is conducting the review, HUD
will make the determination and notify
the PHA that an AHAP may be signed.
a. Debt Coverage Ratio
Overhead: safe harbor—two percent
(2%) of construction contract amount.
19:14 Sep 25, 2014
In cases where an HCA is performing
the review, the HCA must reduce the
subsidy source within its control, i.e.,
the total tax credit allocation amount,
whenever necessary to balance the
project’s sources and uses.
4. Operations Standards
b. Standard (2)
VerDate Sep<11>2014
a. HCA Performing Review
In addition to the analysis of the
development budget as part of the
subsidy layering review process, the
HCA must also evaluate the project’s
15-year operating pro-forma and apply
the standards discussed below and
contained within the Operations section
of Appendix E of this notice. Projectbased voucher assistance and the
amount of cash flow the project-based
voucher rent amounts will generate for
a given project must be carefully
analyzed. The HCA must analyze the
project’s projected DCR over a 15-year
period (the maximum initial term of the
project-based voucher HAP contract).
The DCR is determined to ensure that
the net-income for the project is
sufficient to cover all repayable debt
(i.e., non-forgivable loans) over the life
of the debt. In order to determine
realistic costs over a 15-year period, the
HCA must use appropriate trending
assumptions for their market area.
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57961
Generally, operating expenses should
be trended at 1 percent to 3 percent per
year and rent increases should be
trended at 1 percent to 3 percent per
year for the first 5 years and 3 percent
for each year thereafter. The minimum
DCR is 1.10 and the maximum DCR may
be up to 1.45 provided cash flow for the
project does not exceed the limit
established in accordance with section
VIII.A.4.b of this notice. HUD may
adjust these amounts by notice as new
data becomes available.
If it is projected that the DCR will not
fall below the minimum DCR, the
project should have sufficient cash flow
to pay all project operating expenses
and amortized debt on the project, and
have an acceptable percentage of the
required debt service available for other
uses. In addition, the established DCRs
should ultimately provide sufficient
cash-flow to subsidize very low-income
and extremely low-income families
through the project-based voucher
program that the LIHTC program is
unable to reach. If the DCR exceeds the
maximum stated above, there may be
government assistance in the project
which is more than necessary to make
the project feasible.
Since variances in such things as
vacancy rate, operating cost increases,
and rent increases all affect the net
operating income of a project, the HCA
must perform further trending analysis
to determine whether the number of
proposed project-based vouchers should
be reduced or whether the proposed
rent amounts should be reduced. For
example, if over the 15-year period the
DCR begins to decrease and at some
point it falls below the minimum of
1.10, all trending assumptions and costs
should be re-visited before
recommending a reduction in the
project-based voucher subsidy. After
further analysis, if the DCR is still at a
level above the maximum allowable
level, the HCA may either reduce the
LIHTC allocation amount (for Category
1 projects) or recommend to HUD the
appropriate project-based voucher
subsidy amount including supporting
documentation. HUD will require that
the PHA reduce the level of projectbased voucher subsidy. When HUD is
performing the review, HUD will, if
necessary, reduce the voucher units or
monthly project-based voucher rents
proposed by the PHA.
b. Cash-Flow
In addition to determining an
acceptable DCR, actual cash flow to the
project must also be analyzed. Cashflow is determined after ensuring all
debt can be satisfied and is defined as
total income to the project minus total
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expenses. If the cash flow (minus any
acceptable reserve amounts) exceeds 10
percent of total expenses, the cash
generated from the project-based
voucher assistance may be greater than
is necessary to provide affordable
housing. HUD may adjust this 10
percent standard by notice if new data
becomes available.
If the cash-flow is greater than 10
percent of the total operating expenses,
the HCA must require the owner to revisit the operating pro-forma to bring
cash flow to a level that does not exceed
10 percent of the total operating
expenses. If the owner declines, the
HCA shall recommend to HUD a
reduction in the project-based voucher
rents or the number of project-based
voucher units. Any recommendation
shall include documentation to support
the HCA’s recommendation. When HUD
performs the review, and cash flow is
greater than 10 percent of the total
operating expenses, HUD will notify the
PHA of its determination and instruct
the PHA to require the owner to re-visit
the operating pro-forma to bring the
cash flow to a level that does not exceed
10 percent of the total operating
expenses. If the owner declines, HUD
will notify the PHA of the maximum
number of project-based voucher units
that may be approved and the maximum
project-based voucher rent amounts that
may be approved.
B. Category 2 Subsidy Layering Reviews
Category 2 projects shall only be
required to undergo a limited review.
The limited review shall consist of a
review of the 15-year operations proforma and a review to ensure there is no
duplicative assistance (as stated above
in section VI.B of this notice). The
Operations Standards outlined in
section VIII.A.4. of this notice shall be
used for Category 2 subsidy layering
reviews. Where it is determined that the
inclusion of project-based voucher
assistance will result in governmental
assistance that is more than necessary to
provide affordable housing, the HCA
will make a recommendation, including
supporting documentation, to HUD as to
the appropriate project-based voucher
subsidy amount. If HUD is performing
the review, HUD will, if necessary,
reduce the voucher units or monthly
project-based voucher rents proposed by
the PHA.
C. Category 3 Subsidy Layering Reviews
Section 35 of the 1937 Act (42 U.S.C.
1437z–7) allows HUD to provide Capital
or Operating Funds, or both, to a mixedfinance public housing project.
According to the statute, the units
assisted with Capital or Operating
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19:14 Sep 25, 2014
Jkt 232001
Funds shall be developed, operated, and
maintained in accordance with the
requirements of the 1937 Act. The
statute permits such projects to have
other sources of funding, including
private funding and LIHTC funding
under the Internal Revenue Code (26
U.S.C. 42).
Regulations related to mixed-finance
development are found at 24 CFR
905.604. Pursuant to 24 CFR 905.606
PHAs must submit a development
proposal as well as other specific
materials and documentation for HUD
approval as a precondition to HUD’s
release of public housing funds for a
project’s construction. Under 24 CFR
905.610(b), after the PHA submits the
evidentiary materials and other
documentation required by HUD shall
carry out a subsidy layering analysis
pursuant to section 102(d) of the HUD
Reform Act ‘‘to determine whether the
amount of assistance being provided for
the development is more than necessary
to make the assisted activity feasible
after taking into account other
governmental assistance.’’ The subsidy
layering review is currently conducted
as a part of HUD’s review of a
development proposal and evidentiary
materials and is not designated by HUD
to HCAs.
Contents of Subsidy Layering Analysis
for Mixed-Finance Projects
The HUD subsidy layering analysis
for mixed-finance projects will include
the following review:
a. Cost Control and Safe Harbor
Standards for Rental Mixed-Finance
Development; Risk Factors. HUD will
review all mixed-finance projects for
compliance with HUD’s Cost Control
and Safe Harbor Standards (revised
April 9, 2003), found at: https://portal.
hud.gov/hudportal/documents/huddoc
?id=DOC_9880.pdf. These standards
also contain risk factors for developers
with fees above the safe harbor
standards.
If a project is at or below a safe harbor
standard, no further review will be
required by HUD. If a project is above
a safe harbor standard, additional
review by HUD will be necessary. In
order to approve terms above the safe
harbor, the housing authority must
demonstrate to HUD in writing that the
negotiated terms are appropriate for the
level of risk involved in the project, the
scope of work, any specific
circumstances of the development, and
the local or national market for the
services provided, as described in the
Cost Control and Safe Harbor Standards
b. Total Development Cost. HUD will
review the total development cost of
each mixed-finance development to
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ensure that public housing funds are not
spent in excess of the Total
Development Cost (TDC) and Housing
Construction Cost (HCC) limits pursuant
to § 941.306. PIH Notice 2011–38 or
successor notice contains the current
TDC and HCC limits for specific
jurisdictions, and can be found at:
https://portal.hud.gov/hudportal/HUD
?src=/program_offices/public_indian_
housing/publications/notices/2011.
An automated TDC worksheet can be
found at the following Web site on
mixed-finance development: https://
portal.hud.gov/hudportal/HUD?src=/
program_offices/public_indian_
housing/programs/ph/hope6/mfph.
c. Pro Rata Test. To ensure that the
amount of public housing funds
committed to a project is proportionate
to the number of public housing units
contained in the project, HUD will
conduct a ‘‘Pro Rata Test’’. To meet this
test, the proportion of public housing
funds compared to total project funds
committed to a project must not exceed
the proportion of public housing units
compared to the total number of units
contained in the project. For example, if
there are a total of 120 units in the
project and 50 are public housing units,
the public housing units are 42 percent
of the total number of units in the
project. Therefore the amount of public
housing funds committed to the project
cannot exceed 42 percent of the total
project budget, unless otherwise
approved by HUD. However, if public
housing funds are to be used to pay for
more than the pro rata cost of common
area improvements, HUD will evaluate
the proposal to ensure that common
area improvements will benefit the
residents of the development in a
mixed-income project.
d. Net Low-Income Tax Credit Equity.
Projects using LIHTC as part of their
financing are reviewed to ensure that
the sale of these credits results in an
amount of net tax credit equity being
invested in the project that is consistent
with amounts generally contributed by
investors to similar projects under
similar market conditions, and that is
not less than 51 cents for each dollar of
tax credit allocation awarded to a
project. HUD also reviews this net
amount to ensure that it represents a
market rate of equity, given the current
market for the purchase of tax credits.
To calculate the discounted net
proceeds, HUD reviews the gross
syndication proceeds and other
expenses relevant to completing the tax
credit syndication, compounding the
equity installments received prior to the
project’s Place-in-Service Date and
discounting the installments received
after this date. If the project receives 51
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cents or less or does not receive a
market rate of equity, it is subject to
additional review to reassess the
project’s fees and costs.
For mixed-finance projects that
comply with the mixed-finance
requirements of this notice, no further
subsidy layering analysis will be
required. For those projects that fail to
comply, PHAs must (i) restructure the
project so it complies with the
requirements and resubmit the revised
documentation to HUD for approval, or
(ii) provide sufficient justification to
HUD to allow HUD to approve a
variation(s) from the mixed-finance
requirements of this notice.
IX. Monitoring
HUD may perform quality control
reviews of subsidy layering reviews
performed by participating HCAs. The
quality control reviews will examine the
following:
• Whether all required documents
and materials were available to the
reviewer.
• Whether the values were correctly
determined to be inside or outside of the
approvable range.
• If values were above the safe harbor
standards, whether sufficient
documentation was available to the
reviewer to justify the higher costs.
• If necessary, whether subsidy was
reduced correctly.
If it is determined that any required
documentation was not provided, or
that any portion of the review was
performed incorrectly, HUD may require
appropriate corrective action.
Dated: September 22, 2014.
Jemine A. Bryon,
Acting Assistant Secretary for Public and
Indian Housing.
Appendix A
HCA’s Notice of Intent to Participate
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[________, 20__]
U.S. Department of Housing and Urban
Development
451 7th Street, SW
Room 4232
Washington, DC 20410
By: Email:
pih.financial.management.division@
hud.gov
Re: HCA’s Intent To Participate—
Subsidy Layering Reviews for Proposed
Project-Based Voucher Housing
Assistance Payments Contracts
Ladies and Gentlemen:
The undersigned, a qualified Housing
Credit Agency as defined under Section
42 of the Internal Revenue Code of 1986,
hereby notifies the United States
Department of Housing and Urban
VerDate Sep<11>2014
19:14 Sep 25, 2014
Jkt 232001
Development that it intends to conduct
Subsidy Layering Reviews pursuant to
HUD’s Administrative Guidelines for
Proposed Section 8 Project-Based
Voucher Housing Assistance Payments
Contracts for the purpose of ensuring
that the combination of assistance under
the Section 8 Project-Based Voucher
Program with other federal, State, or
local assistance does not result in
excessive compensation. By signifying
our intent to participate, the _____(name
of agency) hereby certifies that:
The required personnel have
reviewed the above cited statutes, the
Federal Register Notice—
Administrative Guidelines: Subsidy
Layering Reviews for Proposed Section
8 Project-Based Voucher Housing
Assistance Payments Contracts and
Mixed-Finance Development, and 24
CFR Section 983.55.
The agency understands its
responsibilities under the above cited
statutes and the Guidelines. The agency
certifies it will perform subsidy layering
reviews in accordance with all statutory,
regulatory and Guideline requirements,
as well as any future HUD Notices,
Directives, or other program
information.
By executing this Intent to Participate,
the undersign acknowledges that its
participation will continue unless and
until, the Department of Housing and
Urban Development revokes this intent
or ______(name of agency) informs the
HUD, in writing, upon 30 days’ notice
of its decision to withdraw its intent to
participate.
This Notice of Intent to Participate is
hereby executed and dated as of the date
first listed above. By executing this
Notice of Intent, the ______(name of
agency) certifies that, upon HUD
approval, the ______(name of agency)
shall immediately assume the
responsibility of performing subsidy
layering reviews for proposed Section 8
Project-Based Voucher Housing
Assistance Payments Contracts.
The Undersigned requests that the
Department of Housing and Urban
Development please direct all inquiries
and correspondence relating to this
Notice to:
[UNDERSIGNED NAME AND Title]
[STREET ADDRESS]
[CITY], [STATE] [ZIP]
Attention of: [NAME], [TITLE]
By Phone—[XXX–XXX–XXXX]
By Fax—[XXX–XXX–XXXX]
By Email—[email address]
[NAME OF Agency]
By:
llllllllllllllllll
l
Name:
Title:
The completed, signed, and dated
Notice of Intent to Participate should be
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57963
sent as a PDF attachment to an email
message addressed to Miguel Fontanez
at pih.financial.management.division@
hud.gov. The email message subject line
should read ‘‘Submission of Notice of
Intent to Participate.’’
For questions concerning the
submission and receipt of the email
please call (202) 708–2934.
Appendix B
HCA Certification
For purposes of the provision of
Section 8 Project-Based Voucher
Assistance authorized pursuant to 42
U.S.C. section 8(o)(13), section
2835(a)(1)(M)(i) of the Housing and
Economic Recovery Act of 2008 (HERA),
section 102 of the Department of
Housing and Urban Development
Reform Act of 1989, and in accordance
with HUD’s Administrative Guidelines,
all of which address the prevention of
excess governmental subsidy, I hereby
certify that the Section 8 Project-Based
Voucher Assistance provided by the
United States Department of Housing
and Urban Development to ______,
located in ______ is not more than is
necessary to provide affordable housing
after taking into account other
government assistance.
Name of HCA llllllllllll
Printed Name of Authorized HCA Certifying Official llllllllllll
Signature of Authorized HCA Certifying
Official
llllllllllllll
Date llllllllllllllll
Appendix C
HUD Form 2880
https://portal.hud.gov/hudportal/
documents/huddoc?id=2880.pdf
Appendix D
DOCUMENTS TO BE SUBMITTED BY
THE PHA TO THE APPLICABLE HCA
OR HUD HEADQUARTERS FOR
SUBSIDY LAYERING REVIEWS
1. Narrative description of the project.
This should include the total number of
units, including bedroom distribution. If
only a portion of the units will receive
project-based voucher assistance, this
information is needed for both the
project as a whole, and for the assisted
portion.
2. Sources and Uses of Funds
Statement
Sources: List each source separately,
indicate whether loan, grant,
syndication proceeds, contributed
equity, etc. Sources should generally
include only permanent financing. If
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interim financing or a construction loan
will be utilized, details should be
included in a narrative (item 3 below).
Uses: Should be detailed. Do not use
broad categories such as ‘‘soft costs.’’
Acquisition costs should distinguish the
purchase price from related costs such
as appraisal, survey, titled and
recording, and related legal fees.
Construction and rehabilitation should
include builder’s profit and overhead as
separate items.
3. Narrative describing details of each
funding source. For loans, details
should include principle, interest rate,
amortization, term, and any accrual,
deferral, balloon or forgiveness
provisions. If a lender, grantor, or
syndicator is imposing reserve or
escrow requirements, details should be
included in the narrative. If a lender
will receive a portion of the net cash
flow, either as additional debt service or
in addition to debt service, this should
be disclosed in the narrative.
4. Commitment Letters from lenders
or other funding sources evidencing
their commitment to provide funding to
VerDate Sep<11>2014
19:14 Sep 25, 2014
Jkt 232001
the project and disclosing significant
terms. Loan agreements and grant
agreements are sufficient to meet this
requirement. However, proposal letters
and letters of intent are not sufficient to
meet this requirement.
5. Appraisal Report. The appraisal
should establish the ‘‘as is’’ value of the
property, before construction or
rehabilitation, and without
consideration of any financial
implications of tax credits or projectbased voucher assistance.
An appraisal establishing value after
the property is built or rehabilitated is
not acceptable unless it also includes an
‘‘as is’’ valuation.
6. Stabilized Operating Pro Forma.
Should include projected rental,
commercial, and miscellaneous income,
vacancy loss, operating expenses, debt
service, reserve contributions, and cash
flow.
The analysis must be projected over a
15 year period. Income and expenses
must be trended at lllll percent.
7. Tax Credit Allocation Letter. Issued
by the State tax credit allocation agency,
this letter advises the developer of the
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amount of LIHTCs reserved for the
project.
8. Historic Tax Credits. Some projects
in designated historical districts may
receive an additional one time historic
tax credit. When applicable, the amount
of the historic tax credit should be
disclosed.
9. Equity Contribution Schedule. If
equity contributed to the project will be
paid in installments over time, a
schedule should be provided showing
the amount and timing of planned
contributions.
10. Bridge Loans. If the financing plan
includes a bridge loan so that proceeds
can be paid up front when equity
contributions are planned over an
extended period, appropriate details
should be provided.
11. Standard disclosure and perjury
statement.
12. Identity of Interest Statement.
13. PHA commitment letter for
project-based voucher assistance.
14. Proposed project-based voucher
gross rent amounts.
BILLING CODE 4210–67–P
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57965
Appendix E
Subsid
AppendixE
SUBSIDY LAYERING ANALYSIS SUMMARY
and Phase Information
"Safe Harbor"
Standard
This
Project
1. Builder Profit/General Condition/Over-head
"Ceiling"
Standard
6%,2%,6%
SUMMARY: Subsidy Layering Guideline Standards (Note A)
14% Gen Cond + OH&P
2. Developer Fee
12.0%
15.0%
3. Net Equity Proceeds
4. Debt Coverage Ratio
$0.80
Market rate
1.45
1.10
Calculation of Net Equity Proceeds from Syndication (Guideline Standard 3)
(a) Gross LIHTC Equity Syndication Proceeds from Investor
(b) Equity Proceeds Not Available for Project Uses
(i) Bridge Financing Costs (on loans to be repaid by equity) (Note A)
~.,,.,,,,,,,,,,.,,,,,,,,.,,,,,,,,.,••.•..•..• 1
(A) Bridge loan interest
o:
(B) Bridge loan costs other than interest (lender legal, bank fees, etc.)
(ii) Other Syndication Fees and Expenses (Note B)
(A) Ownership entity organizational and legal cost
(B) Syndication fees paid from gross syndication proceeds
(C) Tax credit fees (to LIHTC-awarding agency, etc.)
(D) Other syndication fees and costs (accounting, cost certification, etc.)
··········u·····························~-----,-1
(E) Total deductions from equity syndication proceeds
(c) Amount of Equity Contribution Per Dollar of Tax Credit to the Project
(i) Net Equity Proceeds as of the Placed-in-Service Date (a(i) minus b(ii)(E))
l
(ii) Enter amount of annual tax credit allocation (from tax credit award letter):
(iii) Multiply by 10 (LIHTC award amant is annual allocation per year for 10 years:
1U
X
$
(iv) Equals total LIHTC allocation to project over 10 years:
(v) Multiplied by investor's ownership percentage:
(vi) Equals LIHTC allocation to the investor:
(vii) Net proceeds (c(i)), divided by LIHTC allocation to investor (c(vi)), yields net equity per dollar of =
Calculation of Debt Coverage Ratio (guideline standard 4)
(a) Net Operating Income
(i) Total Operating Income
(ii) minus Total Operating Expenses
(iii) Equals NOI
(b) Debt Coverage Ratio
(i) Debt Service
(II) Net Operating Income (4.(a)(iii) above) divided by Debt Service equals DCR:
(c) Cash Flow
(i)Annual Reserve contributions
(ii) Cash Flow (4.a.iii minus 4.b.i minus 4.c.i)
(iii) Cash Flow as a percentage of Expenses (4.c.ii divided by 4.a.ii)
Notes:
Syndication expenses are total costs (other than bridge loan interest and costs) incurred by the owner in obtaining cash for the sale of tax credits to
investors. Include Q!})y those expenses incurred because of the extraordinary legal, organizational and accounting services and activities associated
with utilizing tax credits.
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EN26SE14.002</GPH>
VerDate Sep<11>2014
Analysis must confirm that only reasonable, market-rate bridge loan interest and costs are recognized (to avoid excess profits that may result when
loans are not negotiated through arm's-length transactions).
B.
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A.
57966
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BILLING CODE 4210–67–C
SUBTOTAL MORTGAGEABLE
REPLACEMENT COST USES$
Appendix F
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
SOURCES AND USES STATEMENT
Non-Mortgage Uses:
(i.e. Uses Payable by Sources Other than
the Mortgage) 10
(Sample Format)
SOURCES:
[FWS–HQ–IA–2014–N201;
FXIA16710900000–145–FF09A30000]
Marine Mammals; Issuance of Permits
Debt Sources:
Mortgage—
Loans—
Other Loans (specify)—
Other (Specify)—
Working Capital Reserve or 11—
Operating Deficit Reserve 12—
SUBTOTAL NON-MORTGAGEABLE
USES—$
Fish and Wildlife Service,
Interior.
ACTION: Notice of issuance of permits.
TOTAL PROJECT USES$
SUMMARY:
AGENCY:
[FR Doc. 2014–22971 Filed 9–25–14; 8:45 am]
We, the U.S. Fish and
Wildlife Service (Service), have issued
the following permits to conduct certain
activities with marine mammals. We
issue these permits under Marine
Mammal Protection Act (MMPA).
ADDRESSES: Brenda Tapia, U.S. Fish and
Wildlife Service, Division of
Management Authority, Branch of
Permits, MS: IA, 5275 Leesburg Pike,
Falls Church, VA 22041; fax (703) 358–
2281; or email DMAFR@fws.gov.
FOR FURTHER INFORMATION CONTACT:
Brenda Tapia, (703) 358–2104
(telephone); (703) 358–2280 (fax);
DMAFR@fws.gov (email).
SUPPLEMENTARY INFORMATION: On the
dates below, as authorized by the
provisions of the ESA (16 U.S.C. 1531
et seq.), as amended, and/or the MMPA,
as amended (16 U.S.C. 1361 et seq.), we
issued requested permits subject to
certain conditions set forth therein. For
each permit for an endangered species,
we found that (1) The application was
filed in good faith, (2) The granted
permit would not operate to the
disadvantage of the endangered species,
and (3) The granted permit would be
consistent with the purposes and policy
set forth in section 2 of the ESA.
BILLING CODE 4210–67–P
Marine Mammals
Equity Sources:
Estimated Net Syndication Proceeds:
Grants available for project uses—
Estimated Net Syndication Proceeds—
Additional Owner Equity Necessary 8—
Other Equity Sources (specify)
Total Sources: $llllll
The HCA may use this format before
completing the Net Syndication
Proceeds estimate line above on the
Sources and Uses Statement, and must
use this format to reflect final allocation
determination assumptions.
Total Tax Credit Allocation—$
Estimated Gross Syndication Proceeds—
$
PROJECT USES:
Mortgage Replacement Cost Uses—
Total Land Improvements—
Total Structures—
General Requirements—
Builder’s General Overhead—
Builder’s Profit 9—
Architects’ Fees—
Bond Premium—
Other Fees—
Construction interest—
Taxes—
Examination Fee—
Inspection Fee—
Financing Fee—
FNMA/GNMA Fee—
Title & Recording—
Legal—
Organization—
Cost Certification Fee—
Contingency Reserve (Sub Rehab)—
BSPRA/SPRA (if applicable)—
Acquisition Costs—
Syndication Expenses:
Accountant’s Fee—$
Syndicator’s Fee—$
Attorney’s Fee 13—$
HCA Fee—$
Organizational Expense 14—$
Other (Specify)—$
Subtotal Syndication Expenses—$ 15
Bridge Loan Costs less Interest (if
applicable)—$
Adjustment for Early and Late
Installments (See Glossary, Net
Syndication Proceeds Estimate for
adjustment explanation)—$
Total Reductions from Gross—$
Estimated Net Syndication Proceeds—$
Permit No.
Applicant
Receipt of application Federal Register notice
05664B .........
166346 .........
Bristol Bay Native Association ......................
Matson’s Laboratory .....................................
78 FR 50083; August 16, 2013 ....................................
79 FR 35375; June 20, 2014 .......................................
Availability of Documents
mstockstill on DSK4VPTVN1PROD with NOTICES
8 This line may be used for the additional amount
needed from the owner to balance sources against
uses when no additional monies are available from
other sources.
9 Builder’s Profit for non-Identity-of-Interest cases
(a SPRA allowance may also be added below). See
also Standard #1 safe harbor and ceiling standard
alternatives before completing. The Mortgage Use
lines relating to Builder’s Profit and Developer’s Fee
may be left blank if alternative funding standards
are used, and the amounts are reflected below.
19:14 Sep 25, 2014
Jkt 232001
September 10, 2014.
September 5, 2014.
Freedom of Information Act, by any
party who submits a written request for
a copy of such documents to: U.S. Fish
and Wildlife Service, Division of
Management Authority, Branch of
Documents and other information
submitted with these applications are
available for review, subject to the
requirements of the Privacy Act and
VerDate Sep<11>2014
Permit issuance date
Permits, MS: IA, 5275 Leesburg Pike,
10 Note that syndication expenses are included
below in the estimation of Net tax credit proceeds
for this Statement, and therefore, are not included
within this Statement.
11 Only Letter of Credit Costs may be included if
the reserve is funded by a Letter of Credit.
12 Indicate the full cash reserve amount if funded
by LIHTC proceeds. Indicate only the costs of
obtaining a Letter of Credit for the reserve if funded
by a Letter of Credit at initial closing.
13 Such fees may not duplicate legal nor title work
charges already recognized. Therefore, only fees
associated with the additional legal service
associated with LIHTC projects should be
recognized here by the HCA.
14 Such expenses may not include Organizational
expenses which are already included, and should
not be duplicated. Therefore, only extraordinary
organizational expenses incurred because of the
additional LIHTC-associated application
preparation activities should be included here.
15 See Guideline Standard #3 for separate safe
harbor and ceiling limitations for private and public
offerings.
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]]>Agencies
[Federal Register Volume 79, Number 187 (Friday, September 26, 2014)]
[Notices]
[Pages 57955-57966]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22971]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5417-N-02]
Administrative Guidelines; Subsidy Layering Reviews for Section 8
Project-Based Voucher Housing Assistance Payments Contracts and Mixed-
Finance Development
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This document provides Administrative Guidelines (Guidelines)
which qualified Housing Credit Agencies (HCAs) must follow in
implementing subsidy layering reviews in accordance with the
requirements of the Housing and Economic Recovery Act of 2008 (HERA),
in those cases where the HCA elects to conduct the review. In certain
instances, described in this notice, HUD will follow these Guidelines
in implementing subsidy layering reviews to satisfy the requirements of
section 102(d) of the Department of Housing and Urban Development
Reform Act of 1989 (HUD Reform Act). The requirements in this notice do
not supersede the subsidy layering requirements of other Federal
programs.
This notice sets forth the guidelines for conducting subsidy
layering reviews for mixed-finance public housing projects and for
newly constructed and rehabilitated structures combining other forms of
government assistance with project-based voucher assistance under
section 8 of the United States Housing Act of 1937 (1937 Act).
[[Page 57956]]
FOR FURTHER INFORMATION CONTACT: Luci Ann Blackburn, Urban
Revitalization Division, Office of Public and Indian Housing,
Department of Housing and Urban Development, 451 7th Street SW., Room
4134, Washington, DC 20410; telephone number 202-402-4190 (this is not
a toll free number); or Miguel A. Fontanez Sanchez, Director, Housing
Voucher Financial Management Division, telephone number 202-402-4212
(this is not a toll free number). Individuals with speech or hearing
impairments may access this number through TTY by calling the toll free
Federal Relay Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
A. Summary Chart
The remainder of this notice describes the current requirements
regarding subsidy layering reviews for different development scenarios.
The current legal requirements and HUD's policy, which are more fully
described in this notice, are summarized for ease of reference in the
following chart:
------------------------------------------------------------------------
Certification
required under
Type of project SLR reviewer section 102(d) of the
HUD Reform Act
------------------------------------------------------------------------
PBV (without LIHTC), New HUD.............. Yes.
Project.
PBV only (without LIHTC), SL Review not No.
Existing Project. required.
PBV with LIHTC................ HCA \1\ or HUD... If the HCA were to do
the review, and the
HCA's SL Review took
into account
proposed PBV
assistance,
certification would
not be required.\2\
Otherwise, HUD must
certify.
PBV with LIHTC and Mixed HCA \3\ or HUD... Yes.
Finance.
Mixed Finance without LIHTC... HUD.............. Yes.
Mixed Finance with LIHTC...... HCA \4\ or HUD... Yes, by entity
performing review.
Mixed Finance with LIHTC/No HUD.............. Yes.
HCA or HCA declines to do
review.
------------------------------------------------------------------------
B. The Housing and Economic Recovery Act of 2008 (HERA)
HERA (Pub. L. 110-289, approved July 30, 2008) made numerous
revisions to the Section 8 Project-Based Voucher program. On November
24, 2008, at 73 FR 71037, HUD published a Federal Register notice to
provide information about HERA's applicability to HUD's public housing
and Section 8 tenant-based and project-based voucher programs. That
notice provided an overview of key provisions of HERA that affect HUD's
public housing programs, and identified those provisions that are self-
implementing, requiring no action on the part of HUD for participants
to commence taking action to be in compliance, and those provisions
that require implementing regulations or guidance on the part of HUD.
That notice also stated that HUD would be issuing implementing guidance
on section 8(o)(13)(M)(i) of the 1937Act (42 U.S.C.
1437f(o)(13)(M)(i)), as applicable to newly constructed or
rehabilitated housing. (See 73 FR 71039.)
---------------------------------------------------------------------------
\1\ It should be noted that, at the time of publication of this
Notice, HUD is doing the subsidy layering reviews in all types of
cases, including in mixed-finance projects with LIHTC.
\2\ Even though not required by HERA, HUD in practice requires
certifications in these cases.
\3\ See footnote 1.
\4\ See footnote 2.
---------------------------------------------------------------------------
On July 9, 2010, at 75 FR 39561, HUD published a Federal Register
notice stating the guidelines HCA's must use in conducting subsidy
layering reviews for newly constructed and/or rehabilitated structures
combining other forms of government assistance with project-based
voucher assistance. These notices state that the HERA provision
relating to the elimination of subsidy layering reviews for existing
housing is self-implementing; the provision relating to State or local
agencies performing subsidy layering reviews for project-based voucher
housing assistance payment (HAP) contracts for new construction and
rehabilitated projects is not self-implementing. This notice restates
and updates these prior notices, including specific guidelines related
to subsidy layering and low-income housing tax credit (LIHTC).
C. Rental Housing Policy Alignment
Through the work of the Rental Housing Policy Alignment team, an
outgrowth of the Interagency Rental Policy Working Group formed in
2011, various workstreams are currently underway to streamline
government oversight and align standards across federal agencies
providing funding for affordable rental housing.\5\ One of these
workstreams is the Subsidy Layering Review group, which seeks to
provide a template for agencies within a State to share duties and
information related to approval and review of federally-funded
affordable housing. A pilot program aiding the signing of Memoranda of
Understanding between various State and federal agencies providing
affordable housing assistance was conducted successfully across seven
states in 2012,\6\ and HUD intends to publish a guidebook that will
allow all agencies that wish to enter into such an agreement to do so.
This notice provides guidance and updates on how and in what situations
such agreements can be utilized to reduce the burden of subsidy
layering review on government agencies.
---------------------------------------------------------------------------
\5\ See https://www.whitehouse.gov/blog/2011/02/01/urban-update-aligning-federal-rental-housing-policy.
\6\ See https://www.huduser.org/portal/pdredge/
pdredgefeatdarticle012612.html.
---------------------------------------------------------------------------
D. Section 102 of the HUD Reform Act and Other Authorities
HUD's regulations in 24 CFR part 4 implement section 102(d) of the
HUD Reform Act (42 U.S.C. 3545(d)) and contain a number of provisions
designed to ensure greater accountability and integrity in the way in
which HUD makes assistance available under certain of its programs.
Section 4.13 of 24 CFR (Limitation of assistance subject to section
102(d)) requires HUD to certify, in accordance with section 102(d) of
the HUD Reform Act, that assistance made available by HUD for a
specific housing project will not be more than is necessary to make the
assisted activity feasible after taking into account assistance from
other government sources. In order to make that certification, a
subsidy layering review must be performed. In addition, The Housing and
Community Development Act of 1992 (Pub. L. 102-550, approved October
28, 1992), as amended by the Multifamily Housing
[[Page 57957]]
Property Disposition Reform Act of 1994 (Pub. L. 103-233, approved
April 4, 1994) added a ``Subsidy Layering Review'' provision at 42
U.S.C. 3545 note, which states that the subsidy layering requirement
for projects receiving assistance under a HUD program and receiving tax
credits may be satisfied ``by a certification by a housing credit
agency to the Secretary, submitted in accordance with guidelines
established by the Secretary, that the combination of assistance within
the jurisdiction of the Secretary and other government assistance
provided in connection with a property for which assistance is to be
provided within the jurisdiction of the Department of Housing and Urban
Development and under section 42 of the Internal Revenue Code of 1986
shall not be any greater than is necessary to provide affordable
housing.'' This statutory note also sets requirements for equity
capital and project costs. Finally, as noted, in 2008, HERA altered
some of these subsidy layering requirements.
Project Based Assistance But No LIHTC
Section 2835 of HERA adds subparagraph (M) to section 8(o)(13) of
the U.S. Housing Act of 1937, 42 U.S.C. 1437(o)(13), which provides
that a subsidy layering review shall not be required for project-based
assistance (1) for an existing structure, or (2) if a subsidy layering
review has been conducted by the applicable State or local agency.
However, this section does not speak to the case where HUD conducts the
review, hence that situation is governed by other applicable law,
specifically, section 102(d) of the HUD Reform Act, 42 U.S.C. 3545(d),
which requires that the Secretary certify that assistance within the
jurisdiction of the Department (except that Title II mortgage insurance
for this purpose is not considered such assistance) to any housing
project shall not be more than is necessary to provide affordable
housing after taking account of assistance described in subsection
(b)(1) of this section. Assistance under (b)(1) includes ``any related
assistance from the federal government, a State, or a unit of general
local government, or any agency or instrumentality thereof.''
HUD Assistance Plus LIHTC
As noted, 42 U.S.C. 3545 note provides that an HCA certification
submitted in accordance with HUD guidelines will suffice in lieu of a
HUD review when HUD assistance and LIHTC are used in a project. Where
there is no current delegation of subsidy layering review authority to
an HCA, on a case-by-case basis, and within its sole discretion, HUD
may delegate the subsidy layering review activity to a local HCA
subject to HUD's review under 42 U.S.C. 3545 note and these guidelines.
In such cases, HUD may request the HCA to make changes to the subsidy
layering review or HUD may revise the HCA's subsidy layering review as
needed. Id.
Mixed-Finance and Public Housing Without LIHTC
It is also possible for mixed-finance arrangements to occur with
other forms of federal assistance, but without LIHTC. In regard to such
mixed-finance and public housing, the applicable law is again section
102(d) of the HUD Reform Act, and HUD is responsible for performing
subsidy layering reviews.
II. Certification
A. HUD's Certification Requirements Pursuant to 102(d) of the HUD
Reform Act
HUD's regulation at 24 CFR 4.13 states that before HUD makes any
assistance subject to section 102(d), with respect to a housing project
for which other government assistance is, or is expected, to be made
available, HUD will determine, and execute a certification, that the
amount of the assistance is not more than is necessary to make the
assisted activity feasible after taking account of the other government
assistance. This review certifies that there are no duplicative
government subsidies when combining HUD housing assistance and forms of
other federal, State, or local government assistance. Where an HCA has
performed a subsidy layering review for a project that has been
allocated LIHTCs and the subsidy layering review took into
consideration the proposed project-based voucher assistance, section
2835(a)(1)(F) of HERA eliminates the need for the HUD Reform Act's
section 102(d) certification requirement. However, HUD's obligation to
certify in accordance with 102(d) of the HUD Reform Act and
implementing regulations at 24 CFR 4.13 still exists where a review has
not been substituted in accordance with the Guidelines contained in
this notice.
1. HCA Participation Where LIHTC Administered by the HCA Is Involved
An HCA is ordinarily designated for the purpose of allocating and
administering the LIHTC program under section 42 of the Internal
Revenue Code (IRC), and so may do the subsidy layering review pursuant
to authorization under this notice where there is LIHTC. In those
transactions where there are other forms of government assistance
involved, as in proposed project-based voucher projects, which do not
include LIHTC, and the HCA has no involvement in respect to the
assistance, HUD will generally conduct subsidy layering reviews and
make the required HUD Reform Act's section 102(d) certification in
accordance with 24 CFR 4.13 for such projects as it is currently doing.
HUD will also continue to conduct the review where there is no HCA
available, or the applicable HCA has declined to perform the subsidy
layering review.
2. HCA Participation Where Other Assistance Administered by the HCA May
Be Involved
Currently, transactions involving LIHTC are the only case where the
HCA has substantial involvement and, absent a waiver requested by the
locality and granted by HUD for good cause, are generally the only case
where the HCA performs the subsidy layering review. However, in the
future, Congress may appropriate forms of assistance where there is
involvement by a local HCA. In those cases, HUD may, by notice
published in the Federal Register, on such terms and conditions as HUD
may provide, and where not contrary to statutory authority, delegate
performance of the subsidy layering review to the local HCA.
B. HCA Certification Under HERA
Under section 8 of the 1937 Act, specifically at 42 U.S.C.
1437f(o)(13)(M), the HUD Reform Act section 102(d) certification is not
required with respect to project-based assistance, or if a subsidy
layering review has been conducted by the applicable HCA. These
Guidelines require that HCAs make an initial certification to HUD when
the agency notifies HUD of its intent to participate. The HCA
certification provides that the HCA will, among other things, properly
apply the Guidelines which HUD establishes. In addition, after a
subsidy layering review has been performed by the applicable HCA, the
HCA must certify that the total assistance provided to the project is
not more than is necessary to provide affordable housing (Appendix B of
this notice).
III. Intent To Participate
An HCA must notify HUD of its intent to participate in the
preparation of subsidy layering reviews for projects combining other
forms of government assistance with project-based voucher assistance
before performing subsidy layering reviews pursuant to this notice.
[[Page 57958]]
Questions or requests for clarification relating to subsidy layering
reviews for units under the project-based voucher program and the
implementation of these Guidelines should be addressed to HUD
Headquarters, Section 8 Financial Management Division, and should be
answered prior to an HCA's notification to HUD of its intent to
participate.
A. Letter to HUD
An interested HCA shall notify HUD of its intent to perform subsidy
layering reviews for newly constructed and rehabilitated projects that
will receive project-based voucher assistance by sending a brief letter
(Appendix A of this notice), executed by an authorized official of the
HCA informing HUD that it: (1) Has reviewed these Guidelines; (2)
understands its responsibilities under these Guidelines; and (3)
certifies that it will perform the subsidy layering review as it
relates to project-based voucher assistance in accordance with all
statutory, regulatory and Guideline requirements. Such letters should
be forwarded via email to the Section 8 Financial Management Division
at HUD Headquarters at the following address:
pih.financial.management.division@hud.gov.
B. HUD Acknowledgement
Once HUD has been notified of an HCA's intention to participate,
HUD will acknowledge that participation by a written letter to the HCA,
and post the agency's name on the Office of Public and Indian Housing's
Web site as a participating agency. Once an HCA's intent to participate
is acknowledged by HUD through a response letter, that agency may
perform subsidy layering reviews, and certify such reviews have been
performed, on behalf of proposed project-based voucher HAP contracts
for newly constructed or rehabilitated units in accordance with the
HCA's existing requirements, provided such requirements are in
substantial compliance with these Guidelines.
C. Revocation of Participation
If HUD determines that an HCA has failed to substantially comply
with these Guidelines, or statutory or regulatory requirements, HUD may
discontinue the HCA's permission to perform subsidy layering reviews on
behalf of proposed project-based voucher HAP contracts. HUD will inform
the HCA in writing of such a determination.
D. HUD Participation
HUD will follow these Guidelines in conducting the required subsidy
layering reviews, and issue a HUD Reform Act section 102(d)
certification pursuant to such review for projects in cases where: (1)
The HCA's authority has been revoked by HUD; (2) an HCA opts to not
accept the responsibilities pursuant to section 2835(a)(1)(F) of HERA;
(3) project-based voucher assistance is combined with other government
assistance that does not include LIHTCs, and the HCA does not have the
authority to conduct such review; or (4) the project is mixed finance.
E. Applicability
These guidelines apply to any contract, grant, loan, cooperative
agreement, or other form of assistance, including the insurance or
guarantee of a loan or mortgage that is provided under a program
administered by HUD for use in, or in connection with, a specific
housing project. Assistance provided under section 8(o)(13) of the 1937
Act (42 U.S.C. 1437f) (project-based vouchers) for new construction or
rehabilitated projects is assistance to which section 102(d) of the HUD
Reform Act applies for subsidy layering review purposes.
IV. Definitions
Category 1 subsidy layering review--Subsidy layering review for
proposed project-based voucher HAP contracts where the HCA conducts the
review, with consideration of project-based voucher assistance.
Category 2 subsidy layering review--Subsidy layering review for
proposed project-based voucher HAP contracts where the HCA conducts the
review, but without consideration of project-based voucher assistance.
Housing Credit Agency (HCA)--For purposes of performing subsidy
layering reviews for proposed project-based voucher projects, a housing
credit agency includes a State housing finance agency, a participating
jurisdiction under HUD's HOME Investment Partnerships program (see 24
CFR part 92), or other State housing agencies that meet the definition
of ``housing credit agency'' as defined by section 42 of the Internal
Revenue Code of 1986. Any agency for which HUD has previously
acknowledged its participation and posted the agency's name on the
Office of Public and Indian Housing's Web site as a participating
agency prior to the effective date of this notice is also considered to
be an HCA for purposes of performing subsidy layering reviews, except
where HUD has revoked the HCA's authority to perform subsidy layering
reviews.
Mixed-finance development--Mixed-finance development refers to the
development (through new construction or acquisition, with or without
rehabilitation) or modernization of public housing pursuant to 24 CFR
905.604, where the public housing units are owned in whole or in part
by an entity other than a PHA. There are various potential scenarios
for the ownership structure of a mixed-finance project, such as: Public
housing units may be owned entirely by a private entity; a PHA may co-
own with a private entity; or a PHA affiliate or instrumentality may
own or co-own the units.
Other government assistance is defined to include any loan, grant,
guarantee, insurance, payment, rebate, subsidy, credit, tax benefit, or
any other form of direct or indirect assistance from the federal
government, a State, or a unit of general local government, or any
agency or instrumentality thereof.
Substantial compliance --For purposes of making the HERA
certification, an HCA may perform subsidy layering reviews for proposed
project-based voucher HAP contracts for newly constructed and
rehabilitated units in accordance with the HCA's existing requirements,
provided such requirements are in substantial compliance with these
Guidelines. To be in substantial compliance, the HCA's guidelines shall
be at least as stringent as these Guidelines, and require equivalent
disclosures from the ownership entity.
V. Public Housing Agencies (PHA) Responsibilities
A. When Subsidy Layering Reviews Are Required
When a new construction or rehabilitation project has been selected
by a PHA pursuant to program regulations at 24 CFR part 983 and the
project combines other forms of governmental assistance, the PHAs must
request a subsidy layering review. As part of the selection process,
the PHA must require information regarding all HUD and/or other
federal, State, or local governmental assistance to be disclosed by the
project owner. Form HUD-2880 \7\ (Appendix C of this notice) may be
used for this purpose, but is not required. The PHA must also instruct
the owner to complete and submit a disclosure statement even if no
other governmental assistance has been received or is anticipated. The
statement must be submitted with the owner's application for project-
based vouchers. The PHA must also inform the owner that if any
information changes on the disclosure,
[[Page 57959]]
either by the addition or deletion of other governmental assistance,
the project owner must submit a revised disclosure statement. If before
or during the HAP contract, the owner receives additional HUD or other
governmental assistance for the project that results in an increase in
project financing in an amount that is equal to or greater than 10
percent of the original development budget, the owner must report such
changes to the PHA and the PHA must notify the HCA, or HUD (if there is
no participating HCA in their jurisdiction), that a further subsidy
layering review is required.
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\7\ See https://portal.hud.gov/hudportal/documents/huddoc?id=2880.pdf.
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B. Requesting Performance of Subsidy Layering Reviews
The PHA must request a subsidy layering review through the
participating HCA. A list of participating HCAs will be posted on HUD's
Office of Public Housing's Web site and updated periodically. If an HCA
is not designated in the PHA's jurisdiction, the PHA should contact its
local HUD field office. The PHA will be informed if there is in fact an
HCA in their jurisdiction that will conduct the review or if the PHA
must submit the required documentation to its local HUD field office.
The local field office will request HUD Headquarters to conduct the
subsidy layering review.
C. Providing Documents Required for Review
The PHA is responsible for collecting all required documentation
from the owner. The documentation required is contained within Appendix
D of this notice. The PHA is also responsible for providing the HCA
with all documents required for the subsidy layering review. The
documents must be forwarded to the HCA with a cover letter. If the
initial submission to the HCA is incomplete, the HCA is in need of
further documentation, or if new information becomes available, the PHA
must provide the documentation to the HCA during the review process.
The PHA should contact the HCA to determine whether any documents
the PHA is required to provide are already in the possession of the
HCA. If the most recent copies of documents the PHA has collected from
the owner are already in the HCA's possession, the PHA must state in
its cover letter to the HCA which documents are not included because
the HCA has informed it that the documents are already in the HCA's
possession. The PHA must still maintain a complete set of the required
documents with the project file for quick reference by either HUD or
the PHA.
D. Subsidy Layering Review Timing and Outcome
In accordance with program regulations at 24 CFR 983.55, a PHA may
not provide project-based voucher assistance until after the required
subsidy layering review has been performed in accordance with these
Guidelines. Therefore, before entering into an Agreement to Enter into
Housing Assistance Payments Contract (AHAP), the PHA must await the
outcome of the subsidy layering review. All other pre-AHAP requirements
must also be satisfied before AHAP execution (e.g., environmental
review). If the HCA with jurisdiction over the project has conducted
the subsidy layering review, the HCA must certify to HUD that the
project-based voucher assistance is in accordance with HUD subsidy
layering requirements. The HCA must provide a copy of the certification
to the PHA to signify to the agency that the subsidy layering review
has been completed and a determination has been made that the project-
based voucher assistance does not result in excessive government
assistance. The PHA may proceed to execute an AHAP at that time.
If the subsidy layering review results in excessive public
assistance, the HCA will notify HUD, in writing, with a copy to the
PHA, of the outcome. The notification will include either a
recommendation to reduce the LIHTC allocation, proposed amount of
project-based voucher assistance, or other assistance, or a
recommendation to permanently withhold entering into an AHAP for the
proposed project. HUD will consult with the HCA and the PHA prior to
issuing its final determination either adopting the HCA's
recommendation or revising the recommendation. Once the PHA receives
HUD's final decision, the PHA must notify the owner in writing of the
outcome.
If HUD conducts the review, HUD is responsible for making the
required HRA section 102(d) certification pursuant to 24 CFR 4.13. If
it is determined that the project-based voucher assistance does not
result in excessive government subsidy, HUD will notify the PHA in
writing. If it is determined that combining housing assistance payment
subsidy under the project-based voucher program with other governmental
assistance results in excessive public assistance, HUD will require
that the PHA reduce the level of project-based voucher subsidy or
inform the owner that the provision of project-based voucher assistance
shall not be provided.
VI. Subsidy Layering Review Categories--Overview
A. Category 1--Proposed Project-Based Voucher HAP Contracts Where the
HCA Conducts the Subsidy Layering Review and Considers Project-Based
Voucher Assistance
Section 8(o)(13)(M)(i) of the 1937 Act (42 U.S.C.
1437f(o)(13)(M)(i)), as added by section 2835(a)(1)(F) of HERA,
provides that a subsidy layering review in accordance with section
102(d) of the HUD Reform Act is not required if a subsidy layering
review has been conducted by a qualified HCA (of course, HUD retains
the option to conduct the review itself). Section 42(m)(2) of the IRC
(26 U.S.C. 42(m)(2)) mandates that HCAs ensure that the amount of
housing tax credit awarded to a project is the minimum amount necessary
for the project to be placed-in-service as affordable rental housing.
As part of its section 42(m)(2) review, the HCA considers all federal,
State, and local subsidies which apply to the project. In making the
determination that the LIHTC dollar amount allocated to a project does
not exceed the amount the HCA determines is necessary for the financial
feasibility of the project, the HCA must evaluate and consider the
sources and uses of funds and the total financing planned for the
project, the proceeds expected to be generated by reason of the LIHTC,
the percentage of the LIHTC dollar amount used for project costs, and
the reasonableness of the developmental and operational costs of the
project. The subsidy layering review Guidelines under this notice are
similar to those required under the IRC section 42(m)(2) review.
The amendment made to the requirements of HUD Reform Act section
102(d) pursuant to section 2835(a)(1)(F) of HERA (for purposes of
project-based voucher assistance), codified at 42 U.S.C.
1437f(o)(13)(M)(i), alleviates the duplication of subsidy layering
reviews (that consider the same factors for the same reasons) by both
HUD and HCAs. The only other review element that an HCA must consider
with the addition of project-based voucher assistance to a proposed
project, is the effect the operational support provided by the project-
based vouchers will have on the HCA's analysis in regards to the level
of subsidy required to make the project feasible without over-
compensation. HCAs must therefore analyze the operating pro-forma that
reflects the inclusion of the project-based voucher assistance as part
of the subsidy layering review process. The operational support
analysis will consider the debt coverage
[[Page 57960]]
ratio (DCR) and the amount of cash-flow generated by an individual
project to determine if excess funding exists within the total
development budget.
In light of the above, when a proposal for project-based voucher
assistance is contemporaneous with the application for, or award of,
LIHTCs, the subsidy layering review required by these Guidelines may be
fulfilled by the IRC section 42(m)(2) review if such review
substantially complies with the subsidy layering review requirements
under this notice. The Department expects that in most cases it will.
If the IRC section 42(m)(2) review substantially complies with the
requirements of a subsidy layering review under this notice, the HCA
may make the required certification (Appendix B of this notice) to HUD
without conducting an additional subsidy layering review pursuant to
these Guidelines. If the HCA cannot make the required certification
because the operation pro-forma was not reviewed as part of its IRC
section 42(m)(2) review in the manner required by these Guidelines, the
HCA must perform the limited review as described in section VIII.B of
this notice and, if necessary, reduce the subsidy source within its
control (i.e., the total tax credit allocation amount) or promptly
notify HUD of a recommendation to reduce the project-based voucher
units or subsidy.
Where HUD conducts the review, for the reasons previously stated,
in addition to evaluating the operational budget, HUD must analyze
whether certain development costs (specifically general condition,
over-head, profits, and developer's fee) are or were excessive. If it
is determined that such costs are excessive, HUD will reduce the amount
of project-based voucher assistance to a level that will sustain the
project's viability without overcompensation. HUD will notify the PHA
before any action to reduce the project-based voucher units due to
issues of overcompensation.
B. Category 2--Proposed Project-Based Voucher HAP Contracts Where the
HCA Conducts the Subsidy Layering Review Without Consideration of
Project-Based Voucher Assistance
Where a subsidy layering review has been conducted by an HCA on a
proposed project-based voucher project for purposes of allocating
LIHTCs which may have also included other forms of government
assistance, but such review did not consider project-based voucher
assistance (e.g., project-based vouchers were obtained subsequent to
the LIHTC allocation), the HCA may conduct a limited review with an
emphasis on the operational aspects of the project in accordance with
Section VIII.B of this notice.
Although project-based voucher projects are exempted from a full
subsidy layering review, the HCA must still be able to certify when
combining HUD and other governmental assistance, including project-
based voucher assistance, that the project is not receiving excessive
compensation. The HCA will be able to make this certification if the
review performed as required by section 42(m)(2) of the IRC
substantially complied with these Guidelines. In addition to ensuring
there is no excessive subsidy, the review must also consider whether
there are any duplicative forms of assistance (i.e., rental assistance
from some other state, federal or local source). If it is found that
there is duplicative rental assistance for the same unit, the unit does
not qualify for project-based voucher assistance, and the HCA must
apprise the PHA of such finding. For purposes of this analysis, LIHTC
units are not considered duplicative rental assistance.
C. Category 3--Mixed-Finance Public Housing Projects
Under HUD's mixed-finance regulations, subsidy layering review must
be conducted by HUD or its designee (e.g., the HCA) pursuant to section
102(d) of the HUD Reform Act (42 U.S.C. 3545(d)). HUD is responsible
for subsidy layering reviews for mixed-finance and public housing
development projects. On a case-by-case basis, and within its sole
discretion, HUD may delegate the subsidy layering review activity to a
local HCA subject to HUD's review. In such cases, HUD may request the
HCA to make changes to the subsidy layering review or HUD may revise
the HCA's subsidy layering review as needed.
VII. Subsidy Layering Review Guidelines--Procedural Description
Subsidy layering reviews are required prior to the execution of an
AHAP for new construction and projects that will undergo
rehabilitation, if the project combines project-based voucher
assistance with other governmental assistance. When an HCA has
conducted a subsidy layering review in connection with the allocation
of LIHTC, the standards used by the HCA must substantially comply with
these Guidelines. When HUD is conducting the subsidy layering review it
will follow these Guidelines and use the Subsidy Layering Analysis form
(Appendix E of this notice).
A. Maximum Allowable Amounts
Maximum Allowable Amounts are those that cannot be exceeded under
any circumstances. If values provided by the project owner exceed the
maximum allowable amounts, reductions must be made in either the
proposed amount of project-based voucher assistance, or the LIHTC
equity to bring the values below the maximum allowable amounts before
the HCA can make its certification to HUD, and, where HUD is performing
the review, before the HRA section 102(d) certification can be made. In
the case of LIHTC syndication proceeds, if the values provided by the
project owner are lower than the minimum LIHTC price, the PHA shall not
enter into an AHAP with the owner unless the LIHTC allocation is
reduced to bring the value of the tax credits at or above the minimum
LIHTC price.
B. Safe Harbor Standards
Safe harbor standards are generally applicable development
standards. Although the safe harbor standards can be exceeded under
certain circumstances, projects for which the owner's documented
development costs and fees are within the safe harbor standards can
move forward without further justification. If any of the owner's costs
and/or fees exceed the safe harbor limits, but are within the maximum
allowable amount, additional justification and documentation are
required.
Between the safe harbor standard and the maximum allowable amounts
for each of the factors considered in the review is a range in which
values may be acceptable if they are justified based on project size,
characteristics, location, and risk factors. Additional documentation
must be requested from the project owner that demonstrates the need for
values that exceed the safe harbor standards. If the review is being
conducted by an HCA, instead of HUD, project costs exceeding the safe
harbor standards must be consistent with the HCA's published qualified
allocation plan. Under no circumstances may costs exceed the total
maximum allowable amounts.
For all projects falling within Category 1, the reviewer (either an
HCA, or HUD) must evaluate development costs to determine whether pre-
development cost associated with the construction of the project is
within a reasonable range, taking into account project size,
characteristics, locations and risk factors; and whether over-head,
builder's profit and developer's fee are also within a reasonable
range, taking
[[Page 57961]]
into account project size, characteristics, locations and risk factors.
VIII. Subsidy Layering Reviews--Guidelines and Requirements
A. Category 1 Subsidy Layering Reviews
For Category 1 projects, HCAs will review all proposed sources and
uses of funds. HCAs will also consider all loans, grants, or other
funds provided by parties other than HUD and will assess the
reasonableness of any escrow or reserve (i.e., maintenance,
operational, and replacement reserves) proposed for the project, taking
into account project size, project characteristics, project location
and project risk factors, as determined by the HCA, even if such
reserves do not affect the amount of subsidy allowed under applicable
program rules.
1. Safe Harbor Percentage Allowances
HCAs will use the following safe harbor standards which HUD has
established for subsidy layering analysis purposes for project-based
voucher HAP contracts: The percentage allowances may be negotiated
between the safe harbor and maximum allowable amounts with the project
sponsor and the individual HCAs to reflect their assessment of the
market and to respect their qualified allocation plan. Any approved
fees that exceed safe harbor amounts must be justified by special
circumstances, such as market conditions or other circumstances that
HUD may determine.
a. Standard (1)
General Condition: safe harbor--six percent (6%) of construction
contract amount.
b. Standard (2)
Overhead: safe harbor--two percent (2%) of construction contract
amount.
c. Standard (3)
Builder's Profit: safe harbor--six percent (6%) of construction
contract amount.
The total allowed or allowable Safe Harbor percentages for General
Conditions, Overhead, and Builder's Profit are based on hard
construction costs and the maximum combined costs shall not be more
than fourteen percent (14%) of the hard construction cost.
d. Standard (4)
Developer's fee: safe harbor--twelve percent (12%) of the total
development cost (profit and overhead).
The maximum allowable developer's fee is fifteen percent (15%) of
the project costs (profit and overhead).
2. When Development Costs Exceed the Safe Harbor Standard
If the costs for builder's profit, or developer's fee, exceed the
safe harbor values without satisfactory documentation for the need for
higher costs, either the HCA or HUD will take the actions outlined
below:
a. HCA Performing Review
In cases where an HCA is performing the review, the HCA must reduce
the subsidy source within its control, i.e., the total tax credit
allocation amount, whenever necessary to balance the project's sources
and uses.
b. HUD Performing Review
Where HUD is performing the review and it is determined that, after
evaluating allowable sources and uses, the combination of assistance
will result in excessive subsidy, HUD will reduce the proposed amount
of project-based voucher assistance.
3. When Development Costs Are Within Safe Harbor
If all safe harbor standards are met, the HCA must examine the
effect project-based voucher assistance will have on the operation's
pro-forma before making its LIHTC allocation. If the safe harbor and
operational standards (discussed below) are met, the HCA must submit
its certification to HUD with a copy to the applicable PHA along with
its sources and uses statement. If HUD is conducting the review, HUD
will make the determination and notify the PHA that an AHAP may be
signed.
4. Operations Standards
a. Debt Coverage Ratio
In addition to the analysis of the development budget as part of
the subsidy layering review process, the HCA must also evaluate the
project's 15-year operating pro-forma and apply the standards discussed
below and contained within the Operations section of Appendix E of this
notice. Project-based voucher assistance and the amount of cash flow
the project-based voucher rent amounts will generate for a given
project must be carefully analyzed. The HCA must analyze the project's
projected DCR over a 15-year period (the maximum initial term of the
project-based voucher HAP contract). The DCR is determined to ensure
that the net-income for the project is sufficient to cover all
repayable debt (i.e., non-forgivable loans) over the life of the debt.
In order to determine realistic costs over a 15-year period, the HCA
must use appropriate trending assumptions for their market area.
Generally, operating expenses should be trended at 1 percent to 3
percent per year and rent increases should be trended at 1 percent to 3
percent per year for the first 5 years and 3 percent for each year
thereafter. The minimum DCR is 1.10 and the maximum DCR may be up to
1.45 provided cash flow for the project does not exceed the limit
established in accordance with section VIII.A.4.b of this notice. HUD
may adjust these amounts by notice as new data becomes available.
If it is projected that the DCR will not fall below the minimum
DCR, the project should have sufficient cash flow to pay all project
operating expenses and amortized debt on the project, and have an
acceptable percentage of the required debt service available for other
uses. In addition, the established DCRs should ultimately provide
sufficient cash-flow to subsidize very low-income and extremely low-
income families through the project-based voucher program that the
LIHTC program is unable to reach. If the DCR exceeds the maximum stated
above, there may be government assistance in the project which is more
than necessary to make the project feasible.
Since variances in such things as vacancy rate, operating cost
increases, and rent increases all affect the net operating income of a
project, the HCA must perform further trending analysis to determine
whether the number of proposed project-based vouchers should be reduced
or whether the proposed rent amounts should be reduced. For example, if
over the 15-year period the DCR begins to decrease and at some point it
falls below the minimum of 1.10, all trending assumptions and costs
should be re-visited before recommending a reduction in the project-
based voucher subsidy. After further analysis, if the DCR is still at a
level above the maximum allowable level, the HCA may either reduce the
LIHTC allocation amount (for Category 1 projects) or recommend to HUD
the appropriate project-based voucher subsidy amount including
supporting documentation. HUD will require that the PHA reduce the
level of project-based voucher subsidy. When HUD is performing the
review, HUD will, if necessary, reduce the voucher units or monthly
project-based voucher rents proposed by the PHA.
b. Cash-Flow
In addition to determining an acceptable DCR, actual cash flow to
the project must also be analyzed. Cash-flow is determined after
ensuring all debt can be satisfied and is defined as total income to
the project minus total
[[Page 57962]]
expenses. If the cash flow (minus any acceptable reserve amounts)
exceeds 10 percent of total expenses, the cash generated from the
project-based voucher assistance may be greater than is necessary to
provide affordable housing. HUD may adjust this 10 percent standard by
notice if new data becomes available.
If the cash-flow is greater than 10 percent of the total operating
expenses, the HCA must require the owner to re-visit the operating pro-
forma to bring cash flow to a level that does not exceed 10 percent of
the total operating expenses. If the owner declines, the HCA shall
recommend to HUD a reduction in the project-based voucher rents or the
number of project-based voucher units. Any recommendation shall include
documentation to support the HCA's recommendation. When HUD performs
the review, and cash flow is greater than 10 percent of the total
operating expenses, HUD will notify the PHA of its determination and
instruct the PHA to require the owner to re-visit the operating pro-
forma to bring the cash flow to a level that does not exceed 10 percent
of the total operating expenses. If the owner declines, HUD will notify
the PHA of the maximum number of project-based voucher units that may
be approved and the maximum project-based voucher rent amounts that may
be approved.
B. Category 2 Subsidy Layering Reviews
Category 2 projects shall only be required to undergo a limited
review. The limited review shall consist of a review of the 15-year
operations pro-forma and a review to ensure there is no duplicative
assistance (as stated above in section VI.B of this notice). The
Operations Standards outlined in section VIII.A.4. of this notice shall
be used for Category 2 subsidy layering reviews. Where it is determined
that the inclusion of project-based voucher assistance will result in
governmental assistance that is more than necessary to provide
affordable housing, the HCA will make a recommendation, including
supporting documentation, to HUD as to the appropriate project-based
voucher subsidy amount. If HUD is performing the review, HUD will, if
necessary, reduce the voucher units or monthly project-based voucher
rents proposed by the PHA.
C. Category 3 Subsidy Layering Reviews
Section 35 of the 1937 Act (42 U.S.C. 1437z-7) allows HUD to
provide Capital or Operating Funds, or both, to a mixed-finance public
housing project. According to the statute, the units assisted with
Capital or Operating Funds shall be developed, operated, and maintained
in accordance with the requirements of the 1937 Act. The statute
permits such projects to have other sources of funding, including
private funding and LIHTC funding under the Internal Revenue Code (26
U.S.C. 42).
Regulations related to mixed-finance development are found at 24
CFR 905.604. Pursuant to 24 CFR 905.606 PHAs must submit a development
proposal as well as other specific materials and documentation for HUD
approval as a precondition to HUD's release of public housing funds for
a project's construction. Under 24 CFR 905.610(b), after the PHA
submits the evidentiary materials and other documentation required by
HUD shall carry out a subsidy layering analysis pursuant to section
102(d) of the HUD Reform Act ``to determine whether the amount of
assistance being provided for the development is more than necessary to
make the assisted activity feasible after taking into account other
governmental assistance.'' The subsidy layering review is currently
conducted as a part of HUD's review of a development proposal and
evidentiary materials and is not designated by HUD to HCAs.
Contents of Subsidy Layering Analysis for Mixed-Finance Projects
The HUD subsidy layering analysis for mixed-finance projects will
include the following review:
a. Cost Control and Safe Harbor Standards for Rental Mixed-Finance
Development; Risk Factors. HUD will review all mixed-finance projects
for compliance with HUD's Cost Control and Safe Harbor Standards
(revised April 9, 2003), found at: https://portal.hud.gov/hudportal/
documents/huddoc?id=DOC9880.pdf. These standards also contain
risk factors for developers with fees above the safe harbor standards.
If a project is at or below a safe harbor standard, no further
review will be required by HUD. If a project is above a safe harbor
standard, additional review by HUD will be necessary. In order to
approve terms above the safe harbor, the housing authority must
demonstrate to HUD in writing that the negotiated terms are appropriate
for the level of risk involved in the project, the scope of work, any
specific circumstances of the development, and the local or national
market for the services provided, as described in the Cost Control and
Safe Harbor Standards
b. Total Development Cost. HUD will review the total development
cost of each mixed-finance development to ensure that public housing
funds are not spent in excess of the Total Development Cost (TDC) and
Housing Construction Cost (HCC) limits pursuant to Sec. 941.306. PIH
Notice 2011-38 or successor notice contains the current TDC and HCC
limits for specific jurisdictions, and can be found at: https://
portal.hud.gov/hudportal/HUD?src=/programoffices/
publicindianhousing/publications/notices/2011.
An automated TDC worksheet can be found at the following Web site
on mixed-finance development: https://portal.hud.gov/hudportal/HUD?src=/
programoffices/publicindianhousing/programs/
ph/hope6/mfph.
c. Pro Rata Test. To ensure that the amount of public housing funds
committed to a project is proportionate to the number of public housing
units contained in the project, HUD will conduct a ``Pro Rata Test''.
To meet this test, the proportion of public housing funds compared to
total project funds committed to a project must not exceed the
proportion of public housing units compared to the total number of
units contained in the project. For example, if there are a total of
120 units in the project and 50 are public housing units, the public
housing units are 42 percent of the total number of units in the
project. Therefore the amount of public housing funds committed to the
project cannot exceed 42 percent of the total project budget, unless
otherwise approved by HUD. However, if public housing funds are to be
used to pay for more than the pro rata cost of common area
improvements, HUD will evaluate the proposal to ensure that common area
improvements will benefit the residents of the development in a mixed-
income project.
d. Net Low-Income Tax Credit Equity. Projects using LIHTC as part
of their financing are reviewed to ensure that the sale of these
credits results in an amount of net tax credit equity being invested in
the project that is consistent with amounts generally contributed by
investors to similar projects under similar market conditions, and that
is not less than 51 cents for each dollar of tax credit allocation
awarded to a project. HUD also reviews this net amount to ensure that
it represents a market rate of equity, given the current market for the
purchase of tax credits. To calculate the discounted net proceeds, HUD
reviews the gross syndication proceeds and other expenses relevant to
completing the tax credit syndication, compounding the equity
installments received prior to the project's Place-in-Service Date and
discounting the installments received after this date. If the project
receives 51
[[Page 57963]]
cents or less or does not receive a market rate of equity, it is
subject to additional review to reassess the project's fees and costs.
For mixed-finance projects that comply with the mixed-finance
requirements of this notice, no further subsidy layering analysis will
be required. For those projects that fail to comply, PHAs must (i)
restructure the project so it complies with the requirements and
resubmit the revised documentation to HUD for approval, or (ii) provide
sufficient justification to HUD to allow HUD to approve a variation(s)
from the mixed-finance requirements of this notice.
IX. Monitoring
HUD may perform quality control reviews of subsidy layering reviews
performed by participating HCAs. The quality control reviews will
examine the following:
Whether all required documents and materials were
available to the reviewer.
Whether the values were correctly determined to be inside
or outside of the approvable range.
If values were above the safe harbor standards, whether
sufficient documentation was available to the reviewer to justify the
higher costs.
If necessary, whether subsidy was reduced correctly.
If it is determined that any required documentation was not
provided, or that any portion of the review was performed incorrectly,
HUD may require appropriate corrective action.
Dated: September 22, 2014.
Jemine A. Bryon,
Acting Assistant Secretary for Public and Indian Housing.
Appendix A
HCA's Notice of Intent to Participate
[
, 20]
U.S. Department of Housing and Urban Development
451 7th Street, SW
Room 4232
Washington, DC 20410
By: Email: pih.financial.management.division@hud.gov
Re: HCA's Intent To Participate--Subsidy Layering Reviews for Proposed
Project-Based Voucher Housing Assistance Payments Contracts
Ladies and Gentlemen:
The undersigned, a qualified Housing Credit Agency as defined under
Section 42 of the Internal Revenue Code of 1986, hereby notifies the
United States Department of Housing and Urban Development that it
intends to conduct Subsidy Layering Reviews pursuant to HUD's
Administrative Guidelines for Proposed Section 8 Project-Based Voucher
Housing Assistance Payments Contracts for the purpose of ensuring that
the combination of assistance under the Section 8 Project-Based Voucher
Program with other federal, State, or local assistance does not result
in excessive compensation. By signifying our intent to participate, the
(name of agency) hereby
certifies that:
The required personnel have reviewed the above cited statutes, the
Federal Register Notice--Administrative Guidelines: Subsidy Layering
Reviews for Proposed Section 8 Project-Based Voucher Housing Assistance
Payments Contracts and Mixed-Finance Development, and 24 CFR Section
983.55.
The agency understands its responsibilities under the above cited
statutes and the Guidelines. The agency certifies it will perform
subsidy layering reviews in accordance with all statutory, regulatory
and Guideline requirements, as well as any future HUD Notices,
Directives, or other program information.
By executing this Intent to Participate, the undersign acknowledges
that its participation will continue unless and until, the Department
of Housing and Urban Development revokes this intent or
(name of agency)
informs the HUD, in writing, upon 30 days' notice of its decision to
withdraw its intent to participate.
This Notice of Intent to Participate is hereby executed and dated
as of the date first listed above. By executing this Notice of Intent,
the (name of
agency) certifies that, upon HUD approval, the
(name of agency)
shall immediately assume the responsibility of performing subsidy
layering reviews for proposed Section 8 Project-Based Voucher Housing
Assistance Payments Contracts.
The Undersigned requests that the Department of Housing and Urban
Development please direct all inquiries and correspondence relating to
this Notice to:
[UNDERSIGNED NAME AND Title]
[STREET ADDRESS]
[CITY], [STATE] [ZIP]
Attention of: [NAME], [TITLE]
By Phone--[XXX-XXX-XXXX]
By Fax--[XXX-XXX-XXXX]
By Email--[email address]
[NAME OF Agency]
By:
-----------------------------------------------------------------------
Name:
Title:
The completed, signed, and dated Notice of Intent to Participate
should be sent as a PDF attachment to an email message addressed to
Miguel Fontanez at pih.financial.management.division@hud.gov. The email
message subject line should read ``Submission of Notice of Intent to
Participate.''
For questions concerning the submission and receipt of the email
please call (202) 708-2934.
Appendix B
HCA Certification
For purposes of the provision of Section 8 Project-Based Voucher
Assistance authorized pursuant to 42 U.S.C. section 8(o)(13), section
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008
(HERA), section 102 of the Department of Housing and Urban Development
Reform Act of 1989, and in accordance with HUD's Administrative
Guidelines, all of which address the prevention of excess governmental
subsidy, I hereby certify that the Section 8 Project-Based Voucher
Assistance provided by the United States Department of Housing and
Urban Development to
, located in
is not more than
is necessary to provide affordable housing after taking into account
other government assistance.
Name of HCA------------------------------------------------------------
Printed Name of Authorized HCA Certi-fying Official--------------------
Signature of Authorized HCA Certifying Official------------------------
Date-------------------------------------------------------------------
Appendix C
HUD Form 2880
https://portal.hud.gov/hudportal/documents/huddoc?id=2880.pdf
Appendix D
DOCUMENTS TO BE SUBMITTED BY THE PHA TO THE APPLICABLE HCA OR HUD
HEADQUARTERS FOR SUBSIDY LAYERING REVIEWS
1. Narrative description of the project. This should include the
total number of units, including bedroom distribution. If only a
portion of the units will receive project-based voucher assistance,
this information is needed for both the project as a whole, and for the
assisted portion.
2. Sources and Uses of Funds Statement
Sources: List each source separately, indicate whether loan, grant,
syndication proceeds, contributed equity, etc. Sources should generally
include only permanent financing. If
[[Page 57964]]
interim financing or a construction loan will be utilized, details
should be included in a narrative (item 3 below).
Uses: Should be detailed. Do not use broad categories such as
``soft costs.'' Acquisition costs should distinguish the purchase price
from related costs such as appraisal, survey, titled and recording, and
related legal fees. Construction and rehabilitation should include
builder's profit and overhead as separate items.
3. Narrative describing details of each funding source. For loans,
details should include principle, interest rate, amortization, term,
and any accrual, deferral, balloon or forgiveness provisions. If a
lender, grantor, or syndicator is imposing reserve or escrow
requirements, details should be included in the narrative. If a lender
will receive a portion of the net cash flow, either as additional debt
service or in addition to debt service, this should be disclosed in the
narrative.
4. Commitment Letters from lenders or other funding sources
evidencing their commitment to provide funding to the project and
disclosing significant terms. Loan agreements and grant agreements are
sufficient to meet this requirement. However, proposal letters and
letters of intent are not sufficient to meet this requirement.
5. Appraisal Report. The appraisal should establish the ``as is''
value of the property, before construction or rehabilitation, and
without consideration of any financial implications of tax credits or
project-based voucher assistance.
An appraisal establishing value after the property is built or
rehabilitated is not acceptable unless it also includes an ``as is''
valuation.
6. Stabilized Operating Pro Forma. Should include projected rental,
commercial, and miscellaneous income, vacancy loss, operating expenses,
debt service, reserve contributions, and cash flow.
The analysis must be projected over a 15 year period. Income and
expenses must be trended at
percent.
7. Tax Credit Allocation Letter. Issued by the State tax credit
allocation agency, this letter advises the developer of the amount of
LIHTCs reserved for the project.
8. Historic Tax Credits. Some projects in designated historical
districts may receive an additional one time historic tax credit. When
applicable, the amount of the historic tax credit should be disclosed.
9. Equity Contribution Schedule. If equity contributed to the
project will be paid in installments over time, a schedule should be
provided showing the amount and timing of planned contributions.
10. Bridge Loans. If the financing plan includes a bridge loan so
that proceeds can be paid up front when equity contributions are
planned over an extended period, appropriate details should be
provided.
11. Standard disclosure and perjury statement.
12. Identity of Interest Statement.
13. PHA commitment letter for project-based voucher assistance.
14. Proposed project-based voucher gross rent amounts.
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BILLING CODE 4210-67-C
Appendix F
SOURCES AND USES STATEMENT
(Sample Format)
SOURCES:
Debt Sources:
Mortgage--
Loans--
Other Loans (specify)--
Other (Specify)--
Equity Sources:
Grants available for project uses--
Estimated Net Syndication Proceeds--
Additional Owner Equity Necessary \8\--
---------------------------------------------------------------------------
\8\ This line may be used for the additional amount needed from
the owner to balance sources against uses when no additional monies
are available from other sources.
---------------------------------------------------------------------------
Other Equity Sources (specify)
Total Sources: $
PROJECT USES:
Mortgage Replacement Cost Uses--
Total Land Improvements--
Total Structures--
General Requirements--
Builder's General Overhead--
Builder's Profit \9\--
---------------------------------------------------------------------------
\9\ Builder's Profit for non-Identity-of-Interest cases (a SPRA
allowance may also be added below). See also Standard 1
safe harbor and ceiling standard alternatives before completing. The
Mortgage Use lines relating to Builder's Profit and Developer's Fee
may be left blank if alternative funding standards are used, and the
amounts are reflected below.
---------------------------------------------------------------------------
Architects' Fees--
Bond Premium--
Other Fees--
Construction interest--
Taxes--
Examination Fee--
Inspection Fee--
Financing Fee--
FNMA/GNMA Fee--
Title & Recording--
Legal--
Organization--
Cost Certification Fee--
Contingency Reserve (Sub Rehab)--
BSPRA/SPRA (if applicable)--
Acquisition Costs--
SUBTOTAL MORTGAGEABLE REPLACEMENT COST USES$
Non-Mortgage Uses:
(i.e. Uses Payable by Sources Other than the Mortgage) \10\
---------------------------------------------------------------------------
\10\ Note that syndication expenses are included below in the
estimation of Net tax credit proceeds for this Statement, and
therefore, are not included within this Statement.
Working Capital Reserve or \11\--
---------------------------------------------------------------------------
\11\ Only Letter of Credit Costs may be included if the reserve
is funded by a Letter of Credit.
---------------------------------------------------------------------------
Operating Deficit Reserve \12\--
---------------------------------------------------------------------------
\12\ Indicate the full cash reserve amount if funded by LIHTC
proceeds. Indicate only the costs of obtaining a Letter of Credit
for the reserve if funded by a Letter of Credit at initial closing.
SUBTOTAL NON-MORTGAGEABLE USES--$
TOTAL PROJECT USES$
Estimated Net Syndication Proceeds:
The HCA may use this format before completing the Net Syndication
Proceeds estimate line above on the Sources and Uses Statement, and
must use this format to reflect final allocation determination
assumptions.
Total Tax Credit Allocation--$
Estimated Gross Syndication Proceeds--$
Syndication Expenses:
Accountant's Fee--$
Syndicator's Fee--$
Attorney's Fee \13\--$
---------------------------------------------------------------------------
\13\ Such fees may not duplicate legal nor title work charges
already recognized. Therefore, only fees associated with the
additional legal service associated with LIHTC projects should be
recognized here by the HCA.
---------------------------------------------------------------------------
HCA Fee--$
Organizational Expense \14\--$
---------------------------------------------------------------------------
\14\ Such expenses may not include Organizational expenses which
are already included, and should not be duplicated. Therefore, only
extraordinary organizational expenses incurred because of the
additional LIHTC-associated application preparation activities
should be included here.
---------------------------------------------------------------------------
Other (Specify)--$
Subtotal Syndication Expenses--$ \15\
---------------------------------------------------------------------------
\15\ See Guideline Standard 3 for separate safe harbor
and ceiling limitations for private and public offerings.
---------------------------------------------------------------------------
Bridge Loan Costs less Interest (if applicable)--$
Adjustment for Early and Late Installments (See Glossary, Net
Syndication Proceeds Estimate for adjustment explanation)--$
Total Reductions from Gross--$
Estimated Net Syndication Proceeds--$
[FR Doc. 2014-22971 Filed 9-25-14; 8:45 am]
BILLING CODE 4210-67-P
