TCAC Clarifies Lease Rider Process

On March 6, 2019, the California Tax Credit Allocation Committee (TCAC) released a notice describing the process for preparing and submitting a Lease Rider Agreement, which is required for all tax credit housing projects developed under a leasehold interest (i.e., where the land is subject to a ground lease). A copy of the notice can be found on the TCAC website here. The notice includes a link to a template for the required Lease Rider Agreement.

A few issues to keep in mind for these types of transactions:

• Form 8609 (Low-Income Housing Credit Allocation and Certification) will not be released by TCAC until the Lease Rider Agreement is executed by all parties.
• The Lease Rider Agreement must be recorded prior to the TCAC regulatory agreement.
• The legal description in the Lease Rider Agreement should reflect the fee simple interest.
• The legal description in the TCAC regulatory agreement should reflect the leasehold interest.
• TCAC executes the Lease Rider Agreement last to ensure that the document is as approved.

For more information regarding TCAC’s policies and procedures, and affordable housing development generally, please feel free to contact us here.

HUD Expands Support for LIHTC Program

The U.S. Department of Housing and Urban Development (HUD) recently announced refinements to its Low-Income Housing Tax Credit (LIHTC) Pilot Program (Pilot Program). These refinements are designed to expedite the review process related to new construction and substantial rehabilitation projects under Sections 221(d)(4) and 220 of the National Housing Act (NHA) that include LIHTCs. The HUD notice can be found here.

HUD’s LIHTC Pilot Program, which began in 2012, created a very effective processing track for Federal Housing Administration (FHA) mortgage insurance applications for LIHTC housing projects financed under the Section 223(f) refinancing program. The recently announced refinements add expedited approval processing for FHA mortgage insurance related to qualified Sections 221(d)4) and 220 projects.

HUD officials report that the Pilot Program refinements were instituted in part to mitigate the general reduction in LIHTC equity investments, which is thought to have resulted from the recent cut in corporate tax rates. An FHA insured mortgage can provide an LIHTC project with higher leverage, helping to shore up funding shortfalls and make the financing package more attractive to investors.

According to the HUD notice, the refinements to the Pilot Program are also designed to encourage long-term investment in projects located in Opportunity Zones. For more information regarding Opportunity Zones, see our recent article in DPK’s The Housing Outlook.

For more information on HUD’s Pilot Program, LIHTCs, and affordable housing generally, please feel free to contact us here.