Administrative Guidelines: Subsidy Layering Review for Project-Based Vouchers, 15443-15448 [2023-05045]
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Federal Register / Vol. 88, No. 48 / Monday, March 13, 2023 / Notices
present, such as an EAD, the agency
should accept your automatically
extended EAD, regardless of the country
of birth listed on the EAD. It may assist
the agency if you:
a. Give the agency a copy of the
relevant Federal Register notice
showing the extension of TPS-related
documentation in addition to your
recent TPS-related document with your
A-number, USCIS number or Form I–94
number;
b. Explain that SAVE will be able to
verify the continuation of your TPS
using this information; and
c. Ask the agency to initiate a SAVE
query with your information and follow
through with additional verification
steps, if necessary, to get a final SAVE
response verifying your TPS.
You can also ask the agency to look
for SAVE notices or contact SAVE if
they have any questions about your
immigration status or automatic
extension of TPS-related
documentation. In most cases, SAVE
provides an automated electronic
response to benefit-granting agencies
within seconds, but occasionally
verification can be delayed.
You can check the status of your
SAVE verification by using CaseCheck
at https://save.uscis.gov/casecheck/.
CaseCheck is a free service that lets you
follow the progress of your SAVE
verification case using your date of birth
and one immigration identifier number
(A-number, USCIS number, or Form I–
94 number) or Verification Case
Number. If an agency has denied your
application based solely or in part on a
SAVE response, the agency must offer
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decision in accordance with the
agency’s procedures. If the agency has
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believe the SAVE response is correct,
the SAVE website, https://
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information on how to make corrections
or update your immigration record,
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[FR Doc. 2023–04735 Filed 3–7–23; 8:45 am]
BILLING CODE 9111–97–P
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–6359–N–01]
Administrative Guidelines: Subsidy
Layering Review for Project-Based
Vouchers
Office of the Assistant
Secretary for Public and Indian
Housing, HUD.
AGENCY:
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ACTION:
Notice.
This notice provides updated
Administrative Guidelines (Guidelines)
and requirements for Project-Based
Voucher (PBV) Subsidy Layering
Reviews (SLRs) and SLR requirements
for Mixed-Finance projects that may or
may not include PBV assistance. This
updated notice provides transparency
on HUD’s expectations regarding cash
flow, debt coverage ratios, net operating
income, operating expense trending
requirements, and expands guidance
related to expense coverage ratios, when
projects do not have hard debt. This
notice also introduces a new mailbox
(PBVSLRs@hud.gov) for SLRs requests
to be performed by HUD HQ, and for
SLR certifications and supporting
documentation for SLRs the Housing
Credit Agencies (HCAs) completed.
Finally, the guidance expands the
delegation of SLRs to HCAs to cases
where PBV assistance is combined with
other government assistance.
Previously, the delegation only covered
cases that included Low-Income
Housing Tax Credits (LIHTCs).
Otherwise SLR cases had to be
completed by HUD (see overview chart
in Section IV).
FOR FURTHER INFORMATION CONTACT:
Miguel A. Fontanez Sanchez, Director,
Housing Voucher Financial
Management Division, telephone
number 202–402–4212 or Belinda Bly,
Supervisor, Urban Revitalization
Division, telephone number 202–402–
4104 (neither are toll free numbers).
Addresses for both: c/o Office of Public
and Indian Housing, Department of
Housing and Urban Development, 451
7th Street SW, Washington, DC 20410.
HUD welcomes and is prepared to
receive calls from individuals who are
deaf or hard of hearing, as well as
individuals with speech and
communication disabilities. To learn
more about how to make an accessible
telephone call, please visit https://
www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
In support of HUD’s mission to create
quality affordable housing, HUD
provides funding assistance to
incentivize affordable housing
development. Subsidy layering reviews
(SLRs) are undertaken to ensure the
amount of assistance provided by HUD
is not more than necessary to make the
PBV project feasible in consideration of
all other government assistance. SLRs
prevent excessive public assistance that
could result when a development
proposes combining (layering) the HAP
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15443
subsidy from the PBV program with
other public assistance from Federal,
State, or local agencies, including
assistance through tax concessions or
credits.
SLRs for PBV assistance are required
pursuant to Section 8(o)(13) of the U.S.
Housing Act of 1937 (42 U.S.C.
1437f(o)(13)); Section 2835(a)(1)(M)(i) of
the Housing and Economic Recovery
Act of 2008 (HERA); and Section 102 of
the Department of Housing and Urban
Development Reform Act of 1989. SLRs
are only for proposed PBV new
construction and rehabilitation projects
as defined in 24 CFR 983.3. Under the
current PBV regulations at 24 CFR
983.55(b), the SLR must be completed
prior to execution of the Agreement to
Enter Into a Housing Assistance
Payments Contract (AHAP).
SLR requirements are not applicable
to existing housing.1 PBV regulations at
24 CFR 983.3 define existing housing as
units that already exist on the proposal
selection date that substantially comply
with Housing Quality Standards (HQS)
on that date. (The units must fully
comply with the HQS before execution
of the HAP contract.) In addition, no
SLR is required when PBV is the only
government assistance provided to a
project.
Pursuant to 24 CFR 983.55, public
housing agencies (PHAs) must submit a
request for an SLR for a proposed PBV
project when the project includes other
government assistance. HUD can
perform the SLRs in all cases, and prior
to issuance of this notice, the
Department had delegated SLR
authority to participating Housing
Credit Agencies (HCAs) only when
assistance included LIHTCs. This Notice
expands the option to delegate SLR
authority to HCAs for proposed PBV
projects when PBV assistance is
combined with other governmental
assistance even if no LIHTCs are
included.2
In cases where PBV projects do not
include LIHTCs, but there is a
participating HCA in the project’s
jurisdiction, the HUD Field Office will
ask the HCA whether they can perform
the SLR. However, the PHAs may
request that the HUD HQ perform the
SLR. If PHAs do not request that HUD
HQ perform the SLR, the HUD Field
1 Section 2835(a)(1)(F) of Housing and Economic
Recovery Act of 2008 (Pub. L. 110–289), enacted
July 30, 2008, does not require subsidy layering
review for existing housing.
2 Pursuant to the Housing and Community
Development Act of 1992 (Pub. L. 102–550,
approved October 28, 1992), as amended by the
Multifamily Housing 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.
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Office will ask the HCA first, but if the
participating HCA is not available to
perform the SLR, the HUD Field Office
will refer the case to HUD HQ to
perform the SLR. HUD recommends that
PHAs communicate in advance with the
participating HCAs (and/or HUD Field
Offices) about the upcoming PBV
projects that do not include LIHTCs so
HCAs can confirm whether they can
perform the SLRs.
II. Subsidy Layering Review
A. Definitions
Housing Credit Agency: For purposes
of this notice, an HCA is a state housing
finance agency or other state agency
defined by Section 42 of the Internal
Revenue Code of 1986. HCAs are
sometimes referred to by other names,
such as State Housing Finance Agencies
or State Housing Corporation. A
participating jurisdiction under HUD’s
HOME Investment Partnerships program
(see 24 CFR part 92) may also serve as
an HCA.
Mixed-finance development:
Development or modernization of
public housing pursuant to 24 CFR 905
Subpart F, where public housing units
are owned by an entity other than a
PHA.
Other government assistance: Any
loan, grant, guarantee, insurance,
payment, rebate, subsidy, tax 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.
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B. Requesting a SLR for a PBV Award
When a PHA selects a project that is
either new construction or
rehabilitation, as defined in 24 CFR
983.3, for a PBV award, and the project
will include forms of government
assistance other than PBVs, the PHA
must request an SLR. PHAs request an
SLR through their local HUD Field
Office or, if eligible, through a
participating HCA. A list of
participating HCAs is posted and
updated periodically on the Housing
Voucher Financial Management
Division (FMD) website, found at:
https://www.hud.gov/program_offices/
public_indian_housing/programs/hcv/
fmd. The participating HCA may charge
a fee to perform the SLR, which the
PHA may pay using Administrative Fees
or Administrative Fee reserves.
The PHA is responsible for collecting
all required documentation for the SLR
from the project owner. A list of
required documentation is included in
Appendix A. If after the initial
submission new information becomes
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available, the PHA is responsible for
submitting updated information to HUD
or the HCA. The PHA maintains a
project file with a complete set of the
required documents. As part of the
project selection process and
application for PBVs, the project owner
must disclose all HUD and/or other
Federal, State, or local government
assistance committed to the project, as
well as other government assistance,
using Form HUD 2880 (even if no other
government assistance is received or is
anticipated). If PBV is the only
government assistance, an SLR is not
required. Whether the PHA or HCA
performs the SLR, the PHA must
confirm that no form of disclosed
assistance renders the project ineligible
for PBV assistance and does not violate
24 CFR 983.54.
The owner must inform the PHA if
any information changes during or after
the application process, either by the
addition or deletion of other
government assistance. The project
owner must provide revised information
to correct the earlier submissions to
reflect the new information. If at any
time during or after the application
process, the owner receives
supplemental HUD or new government
assistance for the project that results in
changes in project financing, or changes
in the number of PBV units, the owner
must submit such changes to the PHA
and the PHA must notify HUD or the
HCA .3 The SLR application should not
be submitted to HUD until all financing
of the project has firm commitments
from all lenders. The AHAP requires
that the owner disclose to the PHA
information regarding any related
assistance from the Federal government,
a State, or a unit of general local
government, or any agency or
instrumentality thereof, that is made
available or expected to be made
available with respect to the contract
units.
The PHA may not enter into the
AHAP with the owner until the
environmental review is completed and
the PHA has received the environmental
approval pursuant to 24 CFR 983.153(b).
At the time of initial submission of the
SLR request, the PHA submits evidence
that a request for a 24 CFR part 58
review is submitted to the responsible
entity, or a 24 CFR part 50 review is
submitted to the Field Office.
C. SLR Analysis and Safe Harbor
Standards
When undertaking an SLR, HUD
reviews both the development and
operating costs of a project to determine
3 24
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whether costs are within a reasonable
range, taking into consideration the
project’s size, characteristics, location,
costs, financing, and risk factors. Costs
that fall within acceptable safe harbor
standards, as identified below, may
move forward without further
justification. If costs exceed safe harbor
standards, then additional justification
and documentation are required to
justify the costs based on risk factors,
and HUD approval is required.
If the review is by an HCA, project
costs exceeding the safe harbor
standards must be consistent with the
HCA’s published qualified allocation
plan.
(A) Development Standards:
i. General Contractor Fees: The safe
harbor standard is based on hard
construction costs. The maximum
allowable combined contractor fee is
fourteen percent (14%) of the total for
hard construction costs. For example, if
construction costs are $100,000, the safe
harbor amount is $14,000:
• Builder’s General Requirements: 6%
of construction contract amount
• Builder’s Overhead: 2% of
construction contract amount
• Builder’s Profit: 6% of construction
contract amount
ii. Developer Fee: The safe harbor
standard is a maximum of 15 percent.
For projects combining public housing
units and PBV units in a Mixed-Finance
project, safe harbors are 9 percent,
requiring no justification, above 9
percent and up to 12 percent, may be
approved with justification. Fees over
12 percent may be approved if the PHA
receives the amount over 12 percent and
it is restricted for project costs or future
phases as described in the ‘‘Cost Control
and Safe Harbor Standards for Rental
Mixed-Finance Development,’’ dated
April 9, 2003, or any successor
document. See Section D on Mixed
Finance Projects below.
(B) Operating Standards: The maximum
initial term for a PBV HAP contract is
20 years pursuant to Section 8(o)(13)(F)
of the 1937 Housing Act as amended by
HOTMA, although the initial terms for
other funding sources may be less. SLR
requests must include an operating pro
forma that reflects each year of the HAP
contract initial term. All assumptions
for income, expenses and debt must be
clearly identified. Both the Debt
Coverage Ratio (DCR) and cash flow are
analyzed on a year-by-year basis. If a
project has no permanent debt (e.g.,
Grants), an Expense Coverage Ratio will
be analyzed.
i. Debt Coverage Ratio: HUD and
HCAs analyze the PBV development’s
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projected DCR both on a yearly basis
and trended over the term of the
proposed subsidy period as an indicator
of overall project health. As a HUD
metric for PBV purposes, the minimum
DCR is 1.10 and the maximum is 1.45.
The DCR for each year is determined by
dividing the net operating income for
that year by the amount of the debt
service for that year. Factors such as
operating cost increases, rent increases,
project size, unit and income mix, and
vacancy rates affect net operating
income. Therefore, a trending analysis is
also used to evaluate the DCR over time
and to determine whether the amount of
assistance is excessive. HUD recognizes
that some projects may have higher
upfront DCRs since owners may
frontload debt service to free up cash
flow later in the project period for
higher anticipated operating expenses,
or that some projects may have higher
DCRs in later years due to planned
changes in financing costs, interest
rates, or partnership transfers. If a
project has an overall trending DCR
outside the 1.10 to 1.45 range, the
project may have too much government
assistance. If a project DCR trends
outside the range for an individual year,
but has an overall trending DCR within
the range, HUD will require
justifications from the owner or PHA to
understand the project’s assumptions
and yearly deviations. If a project has no
hard debt, it must demonstrate an
Expense Coverage Ratio (Gross Income
divided by Total Operating Expenses) of
no less than 1.10 and no higher than
1.45.
• Net operating income is defined as
total operating income minus total
operating expenses. The net operating
income for a project must cover all
repayable debt over the life of the HAP
contract.
• Operating expenses should be
trended at a consistent fixed rate
between 1 percent and 3 percent per
year for the first 5 years and 3 percent
thereafter. Justification for increases
above 3 percent must be provided.
• Rent increases should be trended
yearly at a consistent fixed rate between
2 percent and 3 percent per year.
Justification is required for increases
outside this range.
• Vacancy rates must not exceed 7
percent.
• Debt service is defined as the funds
required to make payments on all nonforgivable loans, including any existing
debt on the property. Debt service does
not include forgivable/soft loans, nonrepayable grants, non-repayable Federal,
State, or local assistance, deferred
developer fees, financing fees, asset fees,
partnership fees, investor fees,
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compliance fees, management fees,
capital contributions, tax concessions,
or tax credits.
If the projected DCR remains between
1.10 and 1.45 during the initial term of
the HAP contract, then it is assumed the
project has enough cash flow to pay
operating expenses and amortized debt,
and that the amount of government
assistance is not excessive. HUD will
require adjustments if the projected DCR
or Expense Coverage Ratio in any one
year falls below 1.10 and continues to
remain below 1.10 for a series of
subsequent years, as cash flow would
not be enough to ensure stable
operations. Likewise, HUD will require
adjustments if the projected DCR
exceeds the maximum of 1.45 in any
one year and continues to remain above
1.45 for a series of subsequent years.
ii. Cash Flow: For any given year of
the project’s operating pro forma, cash
flow may not exceed ten percent (10%)
of total operating expenses. Cash flow is
defined as net operating income minus
all required debt service.
• If all or a portion of the developer
fee has been deferred and is owed, the
face value amount of the deferred
developer fee may be deducted from
cash flow. Accrued interest on the
deferred fee may not be deducted.
• Operational and replacement
reserves may be deducted from cash
flow when reserves are adjusted by a
consistent amount each year.
• No further adjustments to cash flow
are permitted beyond deferred
developer fees, operational reserve
contributions and replacement reserve
contributions.
If in any given year the annual cash
flow is greater than ten percent of total
operating expenses and it remains above
10 percent, it is assumed the cash
generated from the government
assistance is greater than is necessary to
make the project feasible. Therefore,
adjustments must be made by the
project owner to reduce cash flow to 10
percent or less of operating expenses. If
the owner declines, HUD will reduce
PBV rents or the number of PBVs, so
that the project complies with the 10
percent requirement.
applies to Mixed-Finance projects with
PBVs that are undertaken as part of the
Choice Neighborhoods Grant Program,
as well as Choice Neighborhoods
projects that have PBVs, but no public
housing. This includes MTW local
nontraditional development (LNTD)
proposals. OPHI prepares the SLR as
part of the project review process
without a separate PBV SLR review.
As it relates to the PBVs, MixedFinance projects must comply with the
SLR standards identified above in the
Notice. In addition to this review, the
project will also be reviewed to assure
compliance with the provisions of 24
CFR 905 Subpart F, and other applicable
guidance, including the following:
• The ‘‘Cost Control and Safe Harbor
Standards for Rental Mixed-Finance
Development,’’ dated April 9, 2003, or
any successor document.
• Total Development Cost (TDC) and
Housing Construction Cost (HCC) limits
imposed on the project, pursuant to
HUD Notice PIH–2011–38 or successor
notice.
• The HUD Pro Rata Test, which
assures that the proportion of HUD
public housing funds committed to
development of the project does not
exceed the proportion of public housing
units in the project. For example, if
there are 120 units in the project and 50
are public housing, 42 percent of the
units are public housing. Therefore, the
amount of public housing funds
contributed to the development of the
project may not exceed 42 percent of the
development budget, including hard
and soft costs.
• HUD will review the amount of
LIHTC equity to be invested in the
project to ensure that the sale of LIHTCs
results in an amount of net tax credit
equity that is consistent with amounts
generally contributed by investors to
similar projects under similar market
conditions, and that the amount is not
less than 51 cents for each dollar of tax
credit allocation awarded to a project. If
the project receives 51 cents or less of
LIHTC equity or does not receive a
market rate of equity, it is subject to
additional review to reassess the
project’s fees and costs.
D. Requesting a SLR for a MixedFinance Project
For Mixed-Finance projects that also
include PBVs, the SLR is handled as
part of the Mixed-Finance project
review process without a separate PBV
SLR review. SLRs for Mixed-Finance
projects are only done by HUD and may
not be done by an HCA. Mixed-Finance
reviews are done by HUD’s Office of
Public Housing Investments (OPHI) at
HUD Headquarters. This provision also
E. SLR Outcome
(A) HUD: If HUD completes the SLR
and determines the PBV assistance
complies with the standards set in this
Notice, where the PBV assistance will
not result in excessive government
subsidy, HUD will certify compliance
pursuant to 24 CFR 4.13 and the local
HUD Field Office will notify the PHA in
writing.
If HUD completes the SLR and
determines that the amount of
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government subsidy, including the PBV
assistance, is excessive, HUD notifies
the PHA. The notification includes a
recommendation to reduce the amount
of PBV assistance or a determination
that PBV assistance cannot be provided.
Once the PHA receives HUD’s decision,
the PHA must notify the owner in
writing of the outcome and work with
the owner to restructure, as needed.
Revised materials must then be
resubmitted to the HUD Field Office for
review.
(B) HCA: If an HCA completes the
SLR and determines that PBV assistance
complies with the above standards of
this notice and does not result in
excessive government subsidy, the HCA
must notify the PHA and submit a
certification to HUD at PBVSLRs@
hud.gov with a copy to the Director of
the local HUD Office of Public Housing
(https://www.hud.gov/program_offices/
public_indian_housing/about/field_
office) stating that the PBV assistance to
be provided is in accordance with HUD
SLR guidelines in this Notice and that
a determination has been made that it
does not result in excessive government
subsidy. The AHAP/HAP contract may
then be executed if the environmental
approval is received. If the SLR is
performed by an HCA, subsequent
approval of the SLR by HUD is not
required. The HCA certification must
include the documents outlined in
Section III. See Appendix C for a sample
HCA certification letter and Appendix A
for required information.
If the HCA SLR determines the public
assistance amount is excessive, the HCA
must notify HUD, in writing, with a
copy to the PHA. The notification will
include either a recommendation to
reduce the amount of PBV assistance or
the amount of LIHTC allocation or a
determination that PBV assistance
cannot be provided. HUD will consult
with the HCA and the PHA prior to
issuing a final determination to adopt
the HCA’s recommendation or to revise
it. The PHA must notify the owner in
writing of the outcome and work with
the owner to restructure, as needed.
Revised materials must then be
resubmitted to the HCA and the HUD
Field Office for review.
When a proposal for PBV assistance is
contemporaneous with the application
for or award of LIHTCs or other
government approved funds and state
resources, the required SLR may be
fulfilled by the HCA (in accordance
with Section 42(m)(2) of the Internal
Revenue Code (IRC)) if such review
substantially complies with the HUD
SLR requirements and guidelines.
(C) Mixed-Finance Projects: If HUD
completes the SLR and determines the
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PBV assistance and other public
housing assistance complies with the
above standards of this Notice for
Mixed-Finance projects and thus does
not result in excessive government
subsidy, HUD will certify compliance
pursuant to 24 CFR 4.13 and notify the
PHA.
For projects that fail to comply, HUD
will notify the PHA, which must (i)
work with the owner to restructure the
project so it complies with the above
standards for Mixed-Finance projects
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
above standards.
F. SLR Timing
In accordance with program
regulations at 24 CFR 983.55, a PHA
may not execute an AHAP contract until
after the SLR is completed and
approved by HUD or the HCA. The
AHAP also may not be executed until
there is a completed environmental
review (ER) and written approval by the
responsible entity or HUD, pursuant to
24 CFR part 50 or part 58 and PIH
Notice 2016–22. The local HUD Field
Office must receive the completed SLR
and either approve the Request for
Release of Funds or complete a part 50
environmental review prior to notifying
the PHA that it may execute the AHAP.
The PHA may request an SLR and
environmental review simultaneously.
The Field Office confirms to the FMD
and/or the HCA that the ER process is
complete.
If the owner reports to the PHA the
addition of any other government
assistance before or during the AHAP
contract when no SLR was initially
required because the project had not
received and did not anticipate
receiving other government assistance,
then an SLR is required to be requested
by the PHA at the time of the owner’s
report.
III. Housing Credit Agency
Participation and Certification
State HCAs are state-chartered
authorities established to assist and
meet the affordable housing needs of
their states’ residents. Housing Credits
(LIHTC, Historic Tax Credits, etc.),
Housing Bonds, and HOME Investment
Partnerships (HOME) are the federally
authorized programs at the center of
HCA activity within the states. Through
these programs and other Federal and
State resources, HCAs have initiated
hundreds of housing programs, rental,
special needs housing and even
homeownership. Prior to issuance of
this notice, HUD had delegated SLRs to
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authorized HCAs (that submitted an
intent of participation to HUD for
approval) for proposed PBV projects
that include LIHTCs as part of the
proposed financial assistance. (HCAs
were ordinarily designated for the
purpose of allocating and administering
the LIHTC program under IRC Section
42). HUD is herewith expanding the
authority to participating HCAs to
conduct SLRs in cases where LIHTCs
are not included, but other government
assistance is included. Currently 31
states have a HUD-approved HCA; the
remaining states may seek HUD
approval to conduct SLRs for PBV
projects by submitting a letter to HUD
notifying HUD of their intent to
participate. Appendix B contains a
sample letter.
Pursuant to the requirements outlined
herein, as well as the Memorandum Of
Understanding (MOU) between
participating HCAs and HUD, HCAs are
required to provide notification to the
FMD through the FMD mailbox of any
SLRs approved on HUD’s behalf by no
later than 30 days from the date of
authorization. Notifications of approval
must contain the following
documentation:
• Copy of the Signed HCA Certification
as shown in Appendix C
• The HCA’s Internal Recommendation
and Sign-off
• The Developer’s Disclosure of Sources
and Uses of Funds
• The Developer’s Operating Pro Forma
Considered
• Copy of the PBV Commitment/Award
Letter
• HUD Form 2880, and
• Rent Information and Project
Summary. The information on these
fields is collected for reporting
purposes only.
a. Project Name and Address
b. PHA name and code
c. Field Office name and code
d. HCA Name
e. PBV Type: Rental Assistance
Demonstration (RAD), Veterans
Assistance and Supportive Housing
(VASH), and/or Regular
f. Tenant type: Elderly, Disabled,
Homeless, Low-Income Families,
and/or Veteran.
g. Is the Project New Construction or
Rehabilitation?
h. Amount Per Dollar of Syndication
Proceed
i. Number of PBV Units Approved by
Bedroom Size
j. Debt Coverage Ratio or Expense
Coverage Ratio (if applicable):ll
k. Project meets Cash Flow Criteria
(Y/N)
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IV. Overview Chart
The following chart summarizes the
types of projects that require an SLR, the
entity authorized to perform the SLR
and the required certification. 102(d)
Certification is the owner’s certification
15447
of no additional government funding
using form HUD 2880.
Type of project and scenarios
SLR reviewer
102(d) certification required?
PBV subsidy without LIHTC. However, project is new construction or rehabilitation, as defined in 24 CFR 983.3, with 2 or
more forms of other government assistance.
PBV subsidy with LIHTC, new construction or rehabilitated
project.
PBV existing housing, as defined in 24 CFR 983.3 ...................
PBV new construction or rehabilitated housing, but PBV is the
only form of government assistance.
Mixed-finance projects, with or without LIHTC, with or without
PBV, with other forms of government assistance.
HCA or HUD * .........................
If by HCA, certification not required. Otherwise, HUD certifies.
HCA or HUD ...........................
No SLR required .....................
No SLR required .....................
If by HCA, certification not required. Otherwise, HUD certifies.
No.
No.
HUD .........................................
Yes.
* PHAs may request that HUD perform the SLR if the project does not include LIHTCs. If the PHA does not request that HUD perform the
SLR, the Field Office will refer the SLR request to a participating HCA.
V. Monitoring
HUD performs quality control reviews
of SLRs performed by participating
HCAs by examining the following:
• If all required document and materials
are available to the reviewer
• If values are correctly determined
within the approvable range
• If values are above safe harbor
standards
• If documentation was provided to
justify higher costs
• If the subsidy was reduced correctly
(if applicable)
If any required documentation is not
provided, or any portion of the review
is performed incorrectly, HUD requires
appropriate corrective action. When an
SLR is performed by an HCA,
subsequent approval of the SLR by HUD
is not required.
VI. Paperwork Reduction Act
The information collection
requirements contained in this notice
are currently approved by the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) assigned OMB
control numbers 2577–0169. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless the
collection displays a valid control
number.
Dominique Blom,
General Deputy Assistant Secretary for Public
and Indian Housing.
Appendix A: PHA Submissions
PHAs are responsible for collecting
information from project owners and
assembling it in an SLR request submitted to
the local HUD Public Housing Field Office or
HCA. SLR requests must contain the
following information. Assembly using a
binder is recommended. Incomplete
submissions will be returned.
ddrumheller on DSK120RN23PROD with NOTICES1
Required elements of an SLR application & checklist
Check
1. Subsidy Layering Review request memorandum: Clearly identify the PHA, the PHA number, the Field Office number, the
project’s name, the project’s total number of units, and the number of PBV units requested. For a sample memorandum see Attachment 1 of PIH Notice 2013–11 or newer version superseding it.
2. Project Description: Short narrative identifying ownership, type of activity (rehabilitation or new construction), location (including
county), the project’s total number of units, number of PBV units requested, PBV type (RAD, VASH, regular), utility allowances,
bedroom distributions, supportive services (if applicable) and residential population (participants experiencing homelessness, veteran, elderly, low-income families). The narrative should also identify any exceptions applicable to the project (e.g., number of
PBV exceeding the Project Cap). The information on item 2 is collected for reporting purposes only.
3. Accounting Statement of Sources and Uses of Funds: Identifying each source and indicate type (loan, grant, syndication proceeds, contributed equity). Sources generally include only permanent financing and grants. If interim financing or a construction
loan is proposed, provide details in project description. Separately identify detailed uses, avoiding broad categories such as ‘‘soft
costs.’’ Under acquisition costs, identify purchase price separately from related costs such as appraisal, survey, title, recording
and legal fees. Include separate line items representing construction contract amount, builder’s general requirements, builder’s
overhead, builder’s profit, and total project costs. [Complete HUD Form 50156].
4. Description of funding sources: Loans including principal, interest rate, amortization, term, and any accrual, deferral, balloon, or
forgiveness provisions. Describe any lender, grantor, or syndicator requirements for reserves or escrows requirements. Describe
if a lender receives a portion of the net cash flow, either as additional debt service or in addition to debt service. Identify the
amount of LIHTC and include IRS form 8609.
5. Commitment Letters: Lenders and other funding sources evidence their commitment to provide funding and disclose significant
terms. Signed commitment letters, conditional commitment letters, loan agreements and grant agreements meet this requirement.
However, proposal letters and letters of intent or interest do not meet this requirement.
6. Developer’s Commitment Letter: Delineating any arrangements, contributions, donations, significant terms, or transfer of funds
from the developer and/or participating partners such as deferred developer’s fees, cash contributions, land donations and equity
investments.
7. HOME Commitment Letter: (When applicable) Signed document clearly identifying requirements of the HOME designated units
and intended rents.
8. Supportive Service Commitment: (When applicable) A signed Memorandum of Understanding that describes the type of services
to be provided, frequency, terms of service and resident eligibility.
9. Appraisal Report: Based on 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. The appraisal date must be within eighteen
months of the SLR submission.
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10. Completed HUD Form 50156: The form must include the Operating Pro Forma, construction and permanent budget, projected
rental, commercial, and miscellaneous gross income, vacancy loss, operating expenses, debt service, operational reserves contributions, replacement reserve contributions, cash flow projections, debt service ratios; as well as income and expenses trended
at a consistent percentage.
11. Low-Income Housing Tax Credit Allocation Letter: Issued by the authorized tax credit allocation agency, identifying the amount
of LIHTCs reserved for the project.
12. Historic Tax Credit Letter: Issued by an authorized historic credit agency, disclosing the estimated historic tax credit amount
awarded to a project located in a designated historical area.
13. Equity Contribution Schedule: If equity contributed to the project is paid in installments over time, provide a schedule showing
the amount and timing of planned contributions.
14. Bridge Loans: Providing details if the financing plan includes a bridge loan where equity contributions proceeds planned over an
extended time can be paid upfront.
15. Disclosure, perjury and identity of interest statement (Form HUD–2880) completed by the owner.
16. PBV award letter: Identifying the housing authority’s approval of project-based voucher assistance for the project by number of
units and bedroom distribution.
17. PHA rent certification letter: Documenting proposed contract rents, utility allowances, and gross rental amounts for assisted
units. Include rent reasonableness documentation or comparability analysis as evidence of rent determination and certification.
Appendix B: HCA Notice of Intent To
Participate
email, call the Financial Management
Division at (202) 402–4212.
DEPARTMENT OF THE INTERIOR
U.S. Department of Housing and Urban
Development, PIH Financial Management
Division, Room 4232, 451 Seventh Street SW,
Washington, DC 20410.
By: Email:
pih.financial.management.division@hud.gov.
Re: Intent to Participate on Subsidy
Layering Reviews
To Whom It May Concern:
The undersigned is a qualified Housing
Credit Agency (HCA) as defined under
Section 42 of the Internal Revenue Code of
1986 and hereby notifies the United States
Department of Housing and Urban
Development (HUD) of our intention to
conduct subsidy layering reviews (SLRs)
pursuant to HUD’s requirements for the
purpose of ensuring the combination of
assistance under the Section 8 Project-Based
Voucher (PBV) Program with other Federal,
State, or local assistance does not result in
excessive compensation. By signifying this
notice, the undersigned hereby certifies that:
Required personnel reviewed the statutes
identified in Federal Register Notice (Insert
new reference) Contracts and Mixed-Finance
Development, and 24 CFR 983.55.
The undersigned understands its HCA
responsibilities and certifies it will perform
SLRs in accordance with all present and
future statutory, regulatory and HUD
requirements. The undersign acknowledges
participation continues unless and until HUD
revokes this notice or the undersigned
informs HUD, in writing with a 30-day-notice
of its decision to withdraw. Upon HUD
approval, the undersigned shall immediately
assume the responsibility of performing
SLRs.
Name of agency and address:
Name, title, and address if authorized
official
Phone, FAX, and email:
Date of execution:
Transmit signed and dated notice of Intent
to Participate as a PDF attachment to Miguel
Fontanez at
pih.financial.management.division@hud.gov
with subject line identified ‘‘Submission of
Notice of Intent to Participate.’’ For questions
concerning the submission and receipt of the
Appendix C: HCA Certification
Fish and Wildlife Service
U.S. Department of Housing and Urban
Development, PIH Financial Management
Division, Room 4232, 451 Seventh Street SW,
Washington, DC 20410.
By: Email: PBVSLRs@hud.gov.
Re: Certification of Subsidy Layering
Review
To Whom It May Concern:
For purposes of providing of Section 8
Project-Based Voucher (PBV) Assistance
authorized pursuant to 42 U.S.C. 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 requirements,
all of which address the prevention of excess
government subsidy, I hereby certify that the
PBV assistance is not more than is necessary
to provide affordable housing after taking
into account other government assistance for
the following project:
Name, address of project:
Name, address of PHA:
Phone, FAX, and email:
Name, address of HCA:
Date of HUD’s approval of HCA’s intent to
participate:
Name of Authorized HCA Certifying
Official:
Signature of Authorized HCA Certifying
Official:
Date:
Transmit signed and dated SLR
certification as PDF attachments to Miguel A.
Fontanez at PBVSLRs@hud.gov, with a copy
to the Director of the local HUD Office of
Public Housing: https://www.hud.gov/
program_offices/public_indian_housing/
about/field_office, with subject line
identified ‘‘SLR Certification-Project Name,
City, State’’.
For questions concerning the submission
and receipt of the email, contact the
Financial Management Division at
PIH.Financial.Management.Division@
hud.gov.
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Endangered and Threatened Wildlife
and Plants; Initiation of 5-Year Status
Reviews of 27 Listed Species in the
Mountain-Prairie Region
Fish and Wildlife Service,
Interior.
ACTION: Notice of initiation of reviews;
request for information.
AGENCY:
We, the U.S. Fish and
Wildlife Service, are initiating 5-year
status reviews of 27 species under the
Endangered Species Act of 1973, as
amended. A 5-year status review is
based on the best scientific and
commercial data available at the time of
the review; therefore, we are requesting
submission of any new information on
these species that has become available
since the last review of the species.
DATES: To ensure consideration in our
reviews, we are requesting submission
of new information no later than May
12, 2023. However, we will continue to
accept new information about any listed
species at any time.
ADDRESSES: For instructions on how to
submit information for each species, see
the table in the SUPPLEMENTARY
INFORMATION section.
FOR FURTHER INFORMATION CONTACT: To
request information, contact the
appropriate person in the table in the
SUPPLEMENTARY INFORMATION section.
For general information, contact Karen
Newlon, Regional Recovery Project
Manager, by phone at 406–430–9010 or
by email at karen_newlon@fws.gov.
Individuals in the United States who are
deaf, deafblind, hard of hearing, or have
a speech disability may dial 711 (TTY,
TDD, or TeleBraille) to access
SUMMARY:
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Agencies
[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15443-15448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05045]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6359-N-01]
Administrative Guidelines: Subsidy Layering Review for Project-
Based Vouchers
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This notice provides updated Administrative Guidelines
(Guidelines) and requirements for Project-Based Voucher (PBV) Subsidy
Layering Reviews (SLRs) and SLR requirements for Mixed-Finance projects
that may or may not include PBV assistance. This updated notice
provides transparency on HUD's expectations regarding cash flow, debt
coverage ratios, net operating income, operating expense trending
requirements, and expands guidance related to expense coverage ratios,
when projects do not have hard debt. This notice also introduces a new
mailbox ([email protected]) for SLRs requests to be performed by HUD HQ,
and for SLR certifications and supporting documentation for SLRs the
Housing Credit Agencies (HCAs) completed. Finally, the guidance expands
the delegation of SLRs to HCAs to cases where PBV assistance is
combined with other government assistance. Previously, the delegation
only covered cases that included Low-Income Housing Tax Credits
(LIHTCs). Otherwise SLR cases had to be completed by HUD (see overview
chart in Section IV).
FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez Sanchez, Director,
Housing Voucher Financial Management Division, telephone number 202-
402-4212 or Belinda Bly, Supervisor, Urban Revitalization Division,
telephone number 202-402-4104 (neither are toll free numbers).
Addresses for both: c/o Office of Public and Indian Housing, Department
of Housing and Urban Development, 451 7th Street SW, Washington, DC
20410. HUD welcomes and is prepared to receive calls from individuals
who are deaf or hard of hearing, as well as individuals with speech and
communication disabilities. To learn more about how to make an
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
SUPPLEMENTARY INFORMATION:
I. Background
In support of HUD's mission to create quality affordable housing,
HUD provides funding assistance to incentivize affordable housing
development. Subsidy layering reviews (SLRs) are undertaken to ensure
the amount of assistance provided by HUD is not more than necessary to
make the PBV project feasible in consideration of all other government
assistance. SLRs prevent excessive public assistance that could result
when a development proposes combining (layering) the HAP subsidy from
the PBV program with other public assistance from Federal, State, or
local agencies, including assistance through tax concessions or
credits.
SLRs for PBV assistance are required pursuant to Section 8(o)(13)
of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)); Section
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008
(HERA); and Section 102 of the Department of Housing and Urban
Development Reform Act of 1989. SLRs are only for proposed PBV new
construction and rehabilitation projects as defined in 24 CFR 983.3.
Under the current PBV regulations at 24 CFR 983.55(b), the SLR must be
completed prior to execution of the Agreement to Enter Into a Housing
Assistance Payments Contract (AHAP).
SLR requirements are not applicable to existing housing.\1\ PBV
regulations at 24 CFR 983.3 define existing housing as units that
already exist on the proposal selection date that substantially comply
with Housing Quality Standards (HQS) on that date. (The units must
fully comply with the HQS before execution of the HAP contract.) In
addition, no SLR is required when PBV is the only government assistance
provided to a project.
---------------------------------------------------------------------------
\1\ Section 2835(a)(1)(F) of Housing and Economic Recovery Act
of 2008 (Pub. L. 110-289), enacted July 30, 2008, does not require
subsidy layering review for existing housing.
---------------------------------------------------------------------------
Pursuant to 24 CFR 983.55, public housing agencies (PHAs) must
submit a request for an SLR for a proposed PBV project when the project
includes other government assistance. HUD can perform the SLRs in all
cases, and prior to issuance of this notice, the Department had
delegated SLR authority to participating Housing Credit Agencies (HCAs)
only when assistance included LIHTCs. This Notice expands the option to
delegate SLR authority to HCAs for proposed PBV projects when PBV
assistance is combined with other governmental assistance even if no
LIHTCs are included.\2\
---------------------------------------------------------------------------
\2\ Pursuant to the Housing and Community Development Act of
1992 (Pub. L. 102-550, approved October 28, 1992), as amended by the
Multifamily Housing 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.
---------------------------------------------------------------------------
In cases where PBV projects do not include LIHTCs, but there is a
participating HCA in the project's jurisdiction, the HUD Field Office
will ask the HCA whether they can perform the SLR. However, the PHAs
may request that the HUD HQ perform the SLR. If PHAs do not request
that HUD HQ perform the SLR, the HUD Field
[[Page 15444]]
Office will ask the HCA first, but if the participating HCA is not
available to perform the SLR, the HUD Field Office will refer the case
to HUD HQ to perform the SLR. HUD recommends that PHAs communicate in
advance with the participating HCAs (and/or HUD Field Offices) about
the upcoming PBV projects that do not include LIHTCs so HCAs can
confirm whether they can perform the SLRs.
II. Subsidy Layering Review
A. Definitions
Housing Credit Agency: For purposes of this notice, an HCA is a
state housing finance agency or other state agency defined by Section
42 of the Internal Revenue Code of 1986. HCAs are sometimes referred to
by other names, such as State Housing Finance Agencies or State Housing
Corporation. A participating jurisdiction under HUD's HOME Investment
Partnerships program (see 24 CFR part 92) may also serve as an HCA.
Mixed-finance development: Development or modernization of public
housing pursuant to 24 CFR 905 Subpart F, where public housing units
are owned by an entity other than a PHA.
Other government assistance: Any loan, grant, guarantee, insurance,
payment, rebate, subsidy, tax 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.
B. Requesting a SLR for a PBV Award
When a PHA selects a project that is either new construction or
rehabilitation, as defined in 24 CFR 983.3, for a PBV award, and the
project will include forms of government assistance other than PBVs,
the PHA must request an SLR. PHAs request an SLR through their local
HUD Field Office or, if eligible, through a participating HCA. A list
of participating HCAs is posted and updated periodically on the Housing
Voucher Financial Management Division (FMD) website, found at: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fmd. The
participating HCA may charge a fee to perform the SLR, which the PHA
may pay using Administrative Fees or Administrative Fee reserves.
The PHA is responsible for collecting all required documentation
for the SLR from the project owner. A list of required documentation is
included in Appendix A. If after the initial submission new information
becomes available, the PHA is responsible for submitting updated
information to HUD or the HCA. The PHA maintains a project file with a
complete set of the required documents. As part of the project
selection process and application for PBVs, the project owner must
disclose all HUD and/or other Federal, State, or local government
assistance committed to the project, as well as other government
assistance, using Form HUD 2880 (even if no other government assistance
is received or is anticipated). If PBV is the only government
assistance, an SLR is not required. Whether the PHA or HCA performs the
SLR, the PHA must confirm that no form of disclosed assistance renders
the project ineligible for PBV assistance and does not violate 24 CFR
983.54.
The owner must inform the PHA if any information changes during or
after the application process, either by the addition or deletion of
other government assistance. The project owner must provide revised
information to correct the earlier submissions to reflect the new
information. If at any time during or after the application process,
the owner receives supplemental HUD or new government assistance for
the project that results in changes in project financing, or changes in
the number of PBV units, the owner must submit such changes to the PHA
and the PHA must notify HUD or the HCA .\3\ The SLR application should
not be submitted to HUD until all financing of the project has firm
commitments from all lenders. The AHAP requires that the owner disclose
to the PHA information regarding any related assistance from the
Federal government, a State, or a unit of general local government, or
any agency or instrumentality thereof, that is made available or
expected to be made available with respect to the contract units.
---------------------------------------------------------------------------
\3\ 24 CFR 4.11.
---------------------------------------------------------------------------
The PHA may not enter into the AHAP with the owner until the
environmental review is completed and the PHA has received the
environmental approval pursuant to 24 CFR 983.153(b). At the time of
initial submission of the SLR request, the PHA submits evidence that a
request for a 24 CFR part 58 review is submitted to the responsible
entity, or a 24 CFR part 50 review is submitted to the Field Office.
C. SLR Analysis and Safe Harbor Standards
When undertaking an SLR, HUD reviews both the development and
operating costs of a project to determine whether costs are within a
reasonable range, taking into consideration the project's size,
characteristics, location, costs, financing, and risk factors. Costs
that fall within acceptable safe harbor standards, as identified below,
may move forward without further justification. If costs exceed safe
harbor standards, then additional justification and documentation are
required to justify the costs based on risk factors, and HUD approval
is required.
If the review is by an HCA, project costs exceeding the safe harbor
standards must be consistent with the HCA's published qualified
allocation plan.
(A) Development Standards:
i. General Contractor Fees: The safe harbor standard is based on
hard construction costs. The maximum allowable combined contractor fee
is fourteen percent (14%) of the total for hard construction costs. For
example, if construction costs are $100,000, the safe harbor amount is
$14,000:
Builder's General Requirements: 6% of construction contract
amount
Builder's Overhead: 2% of construction contract amount
Builder's Profit: 6% of construction contract amount
ii. Developer Fee: The safe harbor standard is a maximum of 15
percent. For projects combining public housing units and PBV units in a
Mixed-Finance project, safe harbors are 9 percent, requiring no
justification, above 9 percent and up to 12 percent, may be approved
with justification. Fees over 12 percent may be approved if the PHA
receives the amount over 12 percent and it is restricted for project
costs or future phases as described in the ``Cost Control and Safe
Harbor Standards for Rental Mixed-Finance Development,'' dated April 9,
2003, or any successor document. See Section D on Mixed Finance
Projects below.
(B) Operating Standards: The maximum initial term for a PBV HAP
contract is 20 years pursuant to Section 8(o)(13)(F) of the 1937
Housing Act as amended by HOTMA, although the initial terms for other
funding sources may be less. SLR requests must include an operating pro
forma that reflects each year of the HAP contract initial term. All
assumptions for income, expenses and debt must be clearly identified.
Both the Debt Coverage Ratio (DCR) and cash flow are analyzed on a
year-by-year basis. If a project has no permanent debt (e.g., Grants),
an Expense Coverage Ratio will be analyzed.
i. Debt Coverage Ratio: HUD and HCAs analyze the PBV development's
[[Page 15445]]
projected DCR both on a yearly basis and trended over the term of the
proposed subsidy period as an indicator of overall project health. As a
HUD metric for PBV purposes, the minimum DCR is 1.10 and the maximum is
1.45. The DCR for each year is determined by dividing the net operating
income for that year by the amount of the debt service for that year.
Factors such as operating cost increases, rent increases, project size,
unit and income mix, and vacancy rates affect net operating income.
Therefore, a trending analysis is also used to evaluate the DCR over
time and to determine whether the amount of assistance is excessive.
HUD recognizes that some projects may have higher upfront DCRs since
owners may frontload debt service to free up cash flow later in the
project period for higher anticipated operating expenses, or that some
projects may have higher DCRs in later years due to planned changes in
financing costs, interest rates, or partnership transfers. If a project
has an overall trending DCR outside the 1.10 to 1.45 range, the project
may have too much government assistance. If a project DCR trends
outside the range for an individual year, but has an overall trending
DCR within the range, HUD will require justifications from the owner or
PHA to understand the project's assumptions and yearly deviations. If a
project has no hard debt, it must demonstrate an Expense Coverage Ratio
(Gross Income divided by Total Operating Expenses) of no less than 1.10
and no higher than 1.45.
Net operating income is defined as total operating income
minus total operating expenses. The net operating income for a project
must cover all repayable debt over the life of the HAP contract.
Operating expenses should be trended at a consistent fixed
rate between 1 percent and 3 percent per year for the first 5 years and
3 percent thereafter. Justification for increases above 3 percent must
be provided.
Rent increases should be trended yearly at a consistent
fixed rate between 2 percent and 3 percent per year. Justification is
required for increases outside this range.
Vacancy rates must not exceed 7 percent.
Debt service is defined as the funds required to make
payments on all non-forgivable loans, including any existing debt on
the property. Debt service does not include forgivable/soft loans, non-
repayable grants, non-repayable Federal, State, or local assistance,
deferred developer fees, financing fees, asset fees, partnership fees,
investor fees, compliance fees, management fees, capital contributions,
tax concessions, or tax credits.
If the projected DCR remains between 1.10 and 1.45 during the
initial term of the HAP contract, then it is assumed the project has
enough cash flow to pay operating expenses and amortized debt, and that
the amount of government assistance is not excessive. HUD will require
adjustments if the projected DCR or Expense Coverage Ratio in any one
year falls below 1.10 and continues to remain below 1.10 for a series
of subsequent years, as cash flow would not be enough to ensure stable
operations. Likewise, HUD will require adjustments if the projected DCR
exceeds the maximum of 1.45 in any one year and continues to remain
above 1.45 for a series of subsequent years.
ii. Cash Flow: For any given year of the project's operating pro
forma, cash flow may not exceed ten percent (10%) of total operating
expenses. Cash flow is defined as net operating income minus all
required debt service.
If all or a portion of the developer fee has been deferred
and is owed, the face value amount of the deferred developer fee may be
deducted from cash flow. Accrued interest on the deferred fee may not
be deducted.
Operational and replacement reserves may be deducted from
cash flow when reserves are adjusted by a consistent amount each year.
No further adjustments to cash flow are permitted beyond
deferred developer fees, operational reserve contributions and
replacement reserve contributions.
If in any given year the annual cash flow is greater than ten
percent of total operating expenses and it remains above 10 percent, it
is assumed the cash generated from the government assistance is greater
than is necessary to make the project feasible. Therefore, adjustments
must be made by the project owner to reduce cash flow to 10 percent or
less of operating expenses. If the owner declines, HUD will reduce PBV
rents or the number of PBVs, so that the project complies with the 10
percent requirement.
D. Requesting a SLR for a Mixed-Finance Project
For Mixed-Finance projects that also include PBVs, the SLR is
handled as part of the Mixed-Finance project review process without a
separate PBV SLR review. SLRs for Mixed-Finance projects are only done
by HUD and may not be done by an HCA. Mixed-Finance reviews are done by
HUD's Office of Public Housing Investments (OPHI) at HUD Headquarters.
This provision also applies to Mixed-Finance projects with PBVs that
are undertaken as part of the Choice Neighborhoods Grant Program, as
well as Choice Neighborhoods projects that have PBVs, but no public
housing. This includes MTW local nontraditional development (LNTD)
proposals. OPHI prepares the SLR as part of the project review process
without a separate PBV SLR review.
As it relates to the PBVs, Mixed-Finance projects must comply with
the SLR standards identified above in the Notice. In addition to this
review, the project will also be reviewed to assure compliance with the
provisions of 24 CFR 905 Subpart F, and other applicable guidance,
including the following:
The ``Cost Control and Safe Harbor Standards for Rental
Mixed-Finance Development,'' dated April 9, 2003, or any successor
document.
Total Development Cost (TDC) and Housing Construction Cost
(HCC) limits imposed on the project, pursuant to HUD Notice PIH-2011-38
or successor notice.
The HUD Pro Rata Test, which assures that the proportion
of HUD public housing funds committed to development of the project
does not exceed the proportion of public housing units in the project.
For example, if there are 120 units in the project and 50 are public
housing, 42 percent of the units are public housing. Therefore, the
amount of public housing funds contributed to the development of the
project may not exceed 42 percent of the development budget, including
hard and soft costs.
HUD will review the amount of LIHTC equity to be invested
in the project to ensure that the sale of LIHTCs results in an amount
of net tax credit equity that is consistent with amounts generally
contributed by investors to similar projects under similar market
conditions, and that the amount is not less than 51 cents for each
dollar of tax credit allocation awarded to a project. If the project
receives 51 cents or less of LIHTC equity or does not receive a market
rate of equity, it is subject to additional review to reassess the
project's fees and costs.
E. SLR Outcome
(A) HUD: If HUD completes the SLR and determines the PBV assistance
complies with the standards set in this Notice, where the PBV
assistance will not result in excessive government subsidy, HUD will
certify compliance pursuant to 24 CFR 4.13 and the local HUD Field
Office will notify the PHA in writing.
If HUD completes the SLR and determines that the amount of
[[Page 15446]]
government subsidy, including the PBV assistance, is excessive, HUD
notifies the PHA. The notification includes a recommendation to reduce
the amount of PBV assistance or a determination that PBV assistance
cannot be provided. Once the PHA receives HUD's decision, the PHA must
notify the owner in writing of the outcome and work with the owner to
restructure, as needed. Revised materials must then be resubmitted to
the HUD Field Office for review.
(B) HCA: If an HCA completes the SLR and determines that PBV
assistance complies with the above standards of this notice and does
not result in excessive government subsidy, the HCA must notify the PHA
and submit a certification to HUD at [email protected] with a copy to the
Director of the local HUD Office of Public Housing (https://www.hud.gov/program_offices/public_indian_housing/about/field_office)
stating that the PBV assistance to be provided is in accordance with
HUD SLR guidelines in this Notice and that a determination has been
made that it does not result in excessive government subsidy. The AHAP/
HAP contract may then be executed if the environmental approval is
received. If the SLR is performed by an HCA, subsequent approval of the
SLR by HUD is not required. The HCA certification must include the
documents outlined in Section III. See Appendix C for a sample HCA
certification letter and Appendix A for required information.
If the HCA SLR determines the public assistance amount is
excessive, the HCA must notify HUD, in writing, with a copy to the PHA.
The notification will include either a recommendation to reduce the
amount of PBV assistance or the amount of LIHTC allocation or a
determination that PBV assistance cannot be provided. HUD will consult
with the HCA and the PHA prior to issuing a final determination to
adopt the HCA's recommendation or to revise it. The PHA must notify the
owner in writing of the outcome and work with the owner to restructure,
as needed. Revised materials must then be resubmitted to the HCA and
the HUD Field Office for review.
When a proposal for PBV assistance is contemporaneous with the
application for or award of LIHTCs or other government approved funds
and state resources, the required SLR may be fulfilled by the HCA (in
accordance with Section 42(m)(2) of the Internal Revenue Code (IRC)) if
such review substantially complies with the HUD SLR requirements and
guidelines.
(C) Mixed-Finance Projects: If HUD completes the SLR and determines
the PBV assistance and other public housing assistance complies with
the above standards of this Notice for Mixed-Finance projects and thus
does not result in excessive government subsidy, HUD will certify
compliance pursuant to 24 CFR 4.13 and notify the PHA.
For projects that fail to comply, HUD will notify the PHA, which
must (i) work with the owner to restructure the project so it complies
with the above standards for Mixed-Finance projects 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
above standards.
F. SLR Timing
In accordance with program regulations at 24 CFR 983.55, a PHA may
not execute an AHAP contract until after the SLR is completed and
approved by HUD or the HCA. The AHAP also may not be executed until
there is a completed environmental review (ER) and written approval by
the responsible entity or HUD, pursuant to 24 CFR part 50 or part 58
and PIH Notice 2016-22. The local HUD Field Office must receive the
completed SLR and either approve the Request for Release of Funds or
complete a part 50 environmental review prior to notifying the PHA that
it may execute the AHAP. The PHA may request an SLR and environmental
review simultaneously. The Field Office confirms to the FMD and/or the
HCA that the ER process is complete.
If the owner reports to the PHA the addition of any other
government assistance before or during the AHAP contract when no SLR
was initially required because the project had not received and did not
anticipate receiving other government assistance, then an SLR is
required to be requested by the PHA at the time of the owner's report.
III. Housing Credit Agency Participation and Certification
State HCAs are state-chartered authorities established to assist
and meet the affordable housing needs of their states' residents.
Housing Credits (LIHTC, Historic Tax Credits, etc.), Housing Bonds, and
HOME Investment Partnerships (HOME) are the federally authorized
programs at the center of HCA activity within the states. Through these
programs and other Federal and State resources, HCAs have initiated
hundreds of housing programs, rental, special needs housing and even
homeownership. Prior to issuance of this notice, HUD had delegated SLRs
to authorized HCAs (that submitted an intent of participation to HUD
for approval) for proposed PBV projects that include LIHTCs as part of
the proposed financial assistance. (HCAs were ordinarily designated for
the purpose of allocating and administering the LIHTC program under IRC
Section 42). HUD is herewith expanding the authority to participating
HCAs to conduct SLRs in cases where LIHTCs are not included, but other
government assistance is included. Currently 31 states have a HUD-
approved HCA; the remaining states may seek HUD approval to conduct
SLRs for PBV projects by submitting a letter to HUD notifying HUD of
their intent to participate. Appendix B contains a sample letter.
Pursuant to the requirements outlined herein, as well as the
Memorandum Of Understanding (MOU) between participating HCAs and HUD,
HCAs are required to provide notification to the FMD through the FMD
mailbox of any SLRs approved on HUD's behalf by no later than 30 days
from the date of authorization. Notifications of approval must contain
the following documentation:
Copy of the Signed HCA Certification as shown in Appendix C
The HCA's Internal Recommendation and Sign-off
The Developer's Disclosure of Sources and Uses of Funds
The Developer's Operating Pro Forma Considered
Copy of the PBV Commitment/Award Letter
HUD Form 2880, and
Rent Information and Project Summary. The information on these
fields is collected for reporting purposes only.
a. Project Name and Address
b. PHA name and code
c. Field Office name and code
d. HCA Name
e. PBV Type: Rental Assistance Demonstration (RAD), Veterans
Assistance and Supportive Housing (VASH), and/or Regular
f. Tenant type: Elderly, Disabled, Homeless, Low-Income Families,
and/or Veteran.
g. Is the Project New Construction or Rehabilitation?
h. Amount Per Dollar of Syndication Proceed
i. Number of PBV Units Approved by Bedroom Size
j. Debt Coverage Ratio or Expense Coverage Ratio (if applicable):__
k. Project meets Cash Flow Criteria (Y/N)
[[Page 15447]]
IV. Overview Chart
The following chart summarizes the types of projects that require
an SLR, the entity authorized to perform the SLR and the required
certification. 102(d) Certification is the owner's certification of no
additional government funding using form HUD 2880.
------------------------------------------------------------------------
102(d)
Type of project and scenarios SLR reviewer certification
required?
------------------------------------------------------------------------
PBV subsidy without LIHTC. HCA or HUD *...... If by HCA,
However, project is new certification not
construction or rehabilitation, required.
as defined in 24 CFR 983.3, Otherwise, HUD
with 2 or more forms of other certifies.
government assistance.
PBV subsidy with LIHTC, new HCA or HUD........ If by HCA,
construction or rehabilitated certification not
project. required.
Otherwise, HUD
certifies.
PBV existing housing, as defined No SLR required... No.
in 24 CFR 983.3.
PBV new construction or No SLR required... No.
rehabilitated housing, but PBV
is the only form of government
assistance.
Mixed-finance projects, with or HUD............... Yes.
without LIHTC, with or without
PBV, with other forms of
government assistance.
------------------------------------------------------------------------
* PHAs may request that HUD perform the SLR if the project does not
include LIHTCs. If the PHA does not request that HUD perform the SLR,
the Field Office will refer the SLR request to a participating HCA.
V. Monitoring
HUD performs quality control reviews of SLRs performed by
participating HCAs by examining the following:
If all required document and materials are available to the
reviewer
If values are correctly determined within the approvable range
If values are above safe harbor standards
If documentation was provided to justify higher costs
If the subsidy was reduced correctly (if applicable)
If any required documentation is not provided, or any portion of
the review is performed incorrectly, HUD requires appropriate
corrective action. When an SLR is performed by an HCA, subsequent
approval of the SLR by HUD is not required.
VI. Paperwork Reduction Act
The information collection requirements contained in this notice
are currently approved by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520)
assigned OMB control numbers 2577-0169. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection displays a valid control number.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
Appendix A: PHA Submissions
PHAs are responsible for collecting information from project
owners and assembling it in an SLR request submitted to the local
HUD Public Housing Field Office or HCA. SLR requests must contain
the following information. Assembly using a binder is recommended.
Incomplete submissions will be returned.
------------------------------------------------------------------------
Required elements of an SLR application & checklist Check
------------------------------------------------------------------------
1. Subsidy Layering Review request memorandum: Clearly
identify the PHA, the PHA number, the Field Office number,
the project's name, the project's total number of units,
and the number of PBV units requested. For a sample
memorandum see Attachment 1 of PIH Notice 2013-11 or newer
version superseding it.....................................
2. Project Description: Short narrative identifying
ownership, type of activity (rehabilitation or new
construction), location (including county), the project's
total number of units, number of PBV units requested, PBV
type (RAD, VASH, regular), utility allowances, bedroom
distributions, supportive services (if applicable) and
residential population (participants experiencing
homelessness, veteran, elderly, low-income families). The
narrative should also identify any exceptions applicable to
the project (e.g., number of PBV exceeding the Project
Cap). The information on item 2 is collected for reporting
purposes only..............................................
3. Accounting Statement of Sources and Uses of Funds:
Identifying each source and indicate type (loan, grant,
syndication proceeds, contributed equity). Sources
generally include only permanent financing and grants. If
interim financing or a construction loan is proposed,
provide details in project description. Separately identify
detailed uses, avoiding broad categories such as ``soft
costs.'' Under acquisition costs, identify purchase price
separately from related costs such as appraisal, survey,
title, recording and legal fees. Include separate line
items representing construction contract amount, builder's
general requirements, builder's overhead, builder's profit,
and total project costs. [Complete HUD Form 50156].........
4. Description of funding sources: Loans including
principal, interest rate, amortization, term, and any
accrual, deferral, balloon, or forgiveness provisions.
Describe any lender, grantor, or syndicator requirements
for reserves or escrows requirements. Describe if a lender
receives a portion of the net cash flow, either as
additional debt service or in addition to debt service.
Identify the amount of LIHTC and include IRS form 8609.....
5. Commitment Letters: Lenders and other funding sources
evidence their commitment to provide funding and disclose
significant terms. Signed commitment letters, conditional
commitment letters, loan agreements and grant agreements
meet this requirement. However, proposal letters and
letters of intent or interest do not meet this requirement.
6. Developer's Commitment Letter: Delineating any
arrangements, contributions, donations, significant terms,
or transfer of funds from the developer and/or
participating partners such as deferred developer's fees,
cash contributions, land donations and equity investments..
7. HOME Commitment Letter: (When applicable) Signed document
clearly identifying requirements of the HOME designated
units and intended rents...................................
8. Supportive Service Commitment: (When applicable) A signed
Memorandum of Understanding that describes the type of
services to be provided, frequency, terms of service and
resident eligibility.......................................
9. Appraisal Report: Based on 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. The appraisal date must be within
eighteen months of the SLR submission......................
[[Page 15448]]
10. Completed HUD Form 50156: The form must include the
Operating Pro Forma, construction and permanent budget,
projected rental, commercial, and miscellaneous gross
income, vacancy loss, operating expenses, debt service,
operational reserves contributions, replacement reserve
contributions, cash flow projections, debt service ratios;
as well as income and expenses trended at a consistent
percentage.................................................
11. Low-Income Housing Tax Credit Allocation Letter: Issued
by the authorized tax credit allocation agency, identifying
the amount of LIHTCs reserved for the project..............
12. Historic Tax Credit Letter: Issued by an authorized
historic credit agency, disclosing the estimated historic
tax credit amount awarded to a project located in a
designated historical area.................................
13. Equity Contribution Schedule: If equity contributed to
the project is paid in installments over time, provide a
schedule showing the amount and timing of planned
contributions..............................................
14. Bridge Loans: Providing details if the financing plan
includes a bridge loan where equity contributions proceeds
planned over an extended time can be paid upfront..........
15. Disclosure, perjury and identity of interest statement
(Form HUD-2880) completed by the owner.....................
16. PBV award letter: Identifying the housing authority's
approval of project-based voucher assistance for the
project by number of units and bedroom distribution........
17. PHA rent certification letter: Documenting proposed
contract rents, utility allowances, and gross rental
amounts for assisted units. Include rent reasonableness
documentation or comparability analysis as evidence of rent
determination and certification............................
------------------------------------------------------------------------
Appendix B: HCA Notice of Intent To Participate
U.S. Department of Housing and Urban Development, PIH Financial
Management Division, Room 4232, 451 Seventh Street SW, Washington,
DC 20410.
By: Email: [email protected].
Re: Intent to Participate on Subsidy Layering Reviews
To Whom It May Concern:
The undersigned is a qualified Housing Credit Agency (HCA) as
defined under Section 42 of the Internal Revenue Code of 1986 and
hereby notifies the United States Department of Housing and Urban
Development (HUD) of our intention to conduct subsidy layering
reviews (SLRs) pursuant to HUD's requirements for the purpose of
ensuring the combination of assistance under the Section 8 Project-
Based Voucher (PBV) Program with other Federal, State, or local
assistance does not result in excessive compensation. By signifying
this notice, the undersigned hereby certifies that:
Required personnel reviewed the statutes identified in Federal
Register Notice (Insert new reference) Contracts and Mixed-Finance
Development, and 24 CFR 983.55.
The undersigned understands its HCA responsibilities and
certifies it will perform SLRs in accordance with all present and
future statutory, regulatory and HUD requirements. The undersign
acknowledges participation continues unless and until HUD revokes
this notice or the undersigned informs HUD, in writing with a 30-
day-notice of its decision to withdraw. Upon HUD approval, the
undersigned shall immediately assume the responsibility of
performing SLRs.
Name of agency and address:
Name, title, and address if authorized official
Phone, FAX, and email:
Date of execution:
Transmit signed and dated notice of Intent to Participate as a
PDF attachment to Miguel Fontanez at
[email protected] with subject line
identified ``Submission of Notice of Intent to Participate.'' For
questions concerning the submission and receipt of the email, call
the Financial Management Division at (202) 402-4212.
Appendix C: HCA Certification
U.S. Department of Housing and Urban Development, PIH Financial
Management Division, Room 4232, 451 Seventh Street SW, Washington,
DC 20410.
By: Email: [email protected].
Re: Certification of Subsidy Layering Review
To Whom It May Concern:
For purposes of providing of Section 8 Project-Based Voucher
(PBV) Assistance authorized pursuant to 42 U.S.C. 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
requirements, all of which address the prevention of excess
government subsidy, I hereby certify that the PBV assistance is not
more than is necessary to provide affordable housing after taking
into account other government assistance for the following project:
Name, address of project:
Name, address of PHA:
Phone, FAX, and email:
Name, address of HCA:
Date of HUD's approval of HCA's intent to participate:
Name of Authorized HCA Certifying Official:
Signature of Authorized HCA Certifying Official:
Date:
Transmit signed and dated SLR certification as PDF attachments
to Miguel A. Fontanez at [email protected], with a copy to the
Director of the local HUD Office of Public Housing: https://www.hud.gov/program_offices/public_indian_housing/about/field_office, with subject line identified ``SLR Certification-
Project Name, City, State''.
For questions concerning the submission and receipt of the
email, contact the Financial Management Division at
[email protected]
[FR Doc. 2023-05045 Filed 3-10-23; 8:45 am]
BILLING CODE 4210-67-P