The Delaware State Housing Authority (DSHA) held the 2010 Tax Credit Qualified Allocation Plan (QAP) Forum on October 13, 2009 to provide a general update of current development activity and proposed changes to the QAP going forward.
As a general update, two 2008 low income housing tax credit (LIHTC) developments are still trying to close. One 2007 development did a partial exchange of tax credits through the Federal Stimulus Program’s ARRA Tax Credit Exchange Program. One 2008 development did a full exchange of tax credits through the Tax Credit Exchange Program. The 2009 developments are proceeding along.
The State of Delaware expects to receive between $2.3m and $2.6m allocation of low income housing tax credits (LIHTC) for 2010. Of course it is everyone’s hope that it will be $2.6m.
2010 Delaware Qualified Allocation Plan (QAP) – Proposed Changes
The Delaware State Housing Authority (DSHA) is proposing the following (I am highlighting some, but not necessarily all of the proposed changes):
1. A new $1m set aside for new construction or conversion (from market rate units to affordable housing units). This new set aside is in response to research conducted by DSHA in DSHA’s databases as well as input from the development community.
2. There are proposed changes to encourage fully subsidized elderly housing.
3. Minimum Construction Standards. Beginning with the 2010 QAP, all developments will be required to install sprinkler systems (potential exception for scattered site developments). There will be heightened parking lot requirements. New carpet specifications are proposed that might reduce the ongoing maintenance cost of constantly replacing carpeting.
4. For rehabilitation (rehab) developments, there is a rehab checklist that must be fully completed and submitted with the application or the application will be deemed incomplete.
5. New construction contract bidding requirements. All construction contracts for developments receiving any tax credits, Housing Development Fund (HDF) financing or HOME Program financing must be bid out by the developers after the plans have received final approval by DSHA. Developers invite the contractor bidders, but must receive at least three bids. Developers may only invite DSHA pre-qualified bidders. Developers must hire the contractor who supplies the lowest bid regardless of how close the bid prices are to each other. This proposed change has implications on developers who are accustomed to general contracting their own developments.
6. Points have been added for fully ADA compliant units, which may ultimately be occupied non-disabled tenants. In other states, management agents have added riders to those leases whereby the tenants agree to be moved to a non-ADA compliant unit if a new tenant requiring the ADA compliant unit moves to the development.
7. Point deductions for non-compliance. Developers will receive point deductions on their next application for not complying with the requirements of their applications that the developer received points for in the QAP round. However, if a development is non-compliant with any requirement in the Low Income Housing Tax Credit Declaration recorded against the development, that developer may not submit another application to the Delaware State Housing Authority for low income housing tax credits (LIHTC), Housing Development Fund (HDF) financing or HOME Program financing until that development is compliant with the Low Income Housing Tax Credit Declaration.
8. Developer Fee. The Delaware State Housing Authority will raise the cap to the lesser of $1,000,000, ten percent (10%) or the requirement of another program affecting the development. If an identity of interest exists, instead of ten percent (10%), it will be eight and one-half percent (8.5%). There were some comments from developers who think the identity of interest restriction should be removed.
9. Equity Distribution. The Delaware State Housing Authority is moving away from the maximum allowed equity distribution of 1.5% with allowed accumulations. Instead, the surplus cash would be split 50/50 between the partnership and the Delaware State Housing Authority (DSHA) towards any existing Housing Development Fund (HDF) financing. There was some discussion of changing the definition of surplus cash so that the asset management fee payable to the investor would not be paid from surplus cash. There was also some discussion about applying a formula that takes into account the amount of HDF financing.
I have attached the agenda and proposed QAP time table. Tax Credit Forum Agenda 2010 from October 13th
Tim McLaughlin, the DSHA Deputy Director, sent a follow-up e-mail encouraging comments and feedback.
I also look forward to your comments here.