Affordable Housing Resources?

[Joshua Nicholas]

Hi everyone,

I'm hoping someone can help me with this as I've tried to figure out this game by myself to no avail.

I have a project I'm looking at that's 80 units, vacant and needs a full gut rehab. I can get really fantastic terms on the property and from comparing rental rates between market rent and HUD Fair Market Guidelines I think there's a big opportunity in making the deal a Project Based Section 8 building.

If we make that deal with HUD, we can refinance and get 90% LTV with 35 year amortization, fixed rate on a non-recourse basis with the FHA 223(F) program.

I'm just having some issues learning more about the entire affordable housing space whether it's LIHTC, Project Based Section 8, regular Section 8, etc. and I can't figure out whether this is a good idea vs going regular section 8 or just renting it to market rate tenants then refinance and just hold it indefinitely. 

I don't know the pros and cons aside from the possible difficulty in selecting good tenants and dealing with government agencies. I thought the complexity of learning the laws about rent stabilization in NYC was difficult but this is even more daunting and complicated.

Can anyone direct me to some resources that can help me learn about this space? 

Thank you for your help.

[Vitaly Lunev]

Hi Joshua,

I think your question is too complex to answer in a forum post. As affordable, in particular when tax credits are involved, is the most complicated area of multifamily finance. I actually specialize in multifamily finance and have been involved with quite a few affordable deals. Just to give you a bit of overview, if it is truly a gut rehab I am not sure if 223(f) LIHTC PILOT will work as the rehab budget is limited to $40k per door, including the contingency, and can affect only two building system and you can not simply do the LIHTC and some bridge/construction financing and refi into a 223(f) due to the three year rule. I think a 221(d)(4) Sub Rehab might be a better option and there is a similar LIHTC PILOT program that is going to be rolled out shortly that should simplify the process. There are also consideration in regards to the Project Based Vouchers (as project based Section 8 is called in NY) and other factors at play affecting FMR calculation and actual rents/income. All that said if you are interested in talking about this project in more concrete details or try to size it up for various scenarios PM me and we can set an hour aside to talk on the phone.

Best of luck!

[Vitaly Lunev]

Sorry if I did not make it clear in my message but there are not any resources that bring it all together. You can read the HUD MAP Guide (they just re-released it and it the first link in google if you type in HUD MAP Guide) and HUD's guidance on LIHTC PILOT processing below is http://portal.hud.gov/hudportal/HUD/program_office.... Both sources are very lengthy and highly technical, as their target audience are underwriters. They also do not really deal with the LIHTC portion and how it is awarded what is the difference between 4% and 9% tax credits, what state by state requirements are etc. Hope that information helps and best of luck again, affordable can be very good for you and society as a whole when done right! 

[Eric Schleif]

Joshua,

There are several lending and tax abatement programs available for affordable housing development in NYC. Most are run through the New York City Department of Housing Preservation and Development (HPD).

This is a complex topic to try and cover in a forum post because the programs and their requirements all vary significantly and I would need a lot more information on the project to be able to give any meaningful feedback. It sounds like this might be your first time looking at developing an affordable multi-family deal. If that's the case, any of the subsidy lenders or agencies are going to require you partner up with an experienced affordable housing developer.

Going the LIHTC route is also very complex. Your competing for the tax credits with other developers. There are only so many credits allocated per state and they are awarded based on a project's bid or application score. I've seen not for profit developers who only do LIHTC deals with tons of experience not get awarded credits quite often.

I think you should reach out to HPD and see if they can give some advice or some contacts for affordable housing developers and go from there. Good luck.

[Eric Schleif]

And you an also try reaching out the Community Preservation Corporation (CPC). Their website is www.communityp.com
They are one of the largest private not for profit affordable housing lenders in the country. I actually began my career with them. Can't believe I forgot to mention them in my original post.

[Jim Groves]

Originally posted by @Vitaly Lunev:

Sorry if I did not make it clear in my message but there are not any resources that bring it all together. You can read the HUD MAP Guide (they just re-released it and it the first link in google if you type in HUD MAP Guide) and HUD's guidance on LIHTC PILOT processing below is http://portal.hud.gov/hudportal/HUD/program_office.... Both sources are very lengthy and highly technical, as their target audience are underwriters. They also do not really deal with the LIHTC portion and how it is awarded what is the difference between 4% and 9% tax credits, what state by state requirements are etc. Hope that information helps and best of luck again, affordable can be very good for you and society as a whole when done right! 

 @Vitaly Lunev, I agree that the resources are too technical and we're working to simplify. If you check out our site there is an education center regarding the LIHTC program. We're also working on a state by state application process online, as the State QAPs can be very lengthy.  Let me know your thoughts.