Layered funds
Most affordable and repositioning deals are built from a layered stack of sources, some private, like the housing credits and bonds, and some public, like HOME, CDBG, and the Housing Trust Funds. Each one arrives in a different form and carries its own compliance. Here is the stack, and the strings attached to each source.
Each source, the form it takes, and the strings it carries
Low-Income Housing Tax Credits (LIHTC). Private investor equity, raised by selling the 9% credit or the 4% credit to a tax credit investor. The strings run for the full compliance and extended-use period: income and rent limits, tenant file documentation, and recapture risk if the property falls out of compliance.
Tax-exempt bonds. Debt issued through a state or local authority. Meeting the bond financing test, within the state volume cap, is what earns the 4% credits that ride alongside.
HOME funds. Usually a soft or forgivable loan from the local Participating Jurisdiction. The strings include income targeting, HOME rent limits, a long affordability period recorded against the property, an environmental review before funds commit, and federal labor and relocation rules on larger projects.
CDBG (Community Development Block Grant). Usually a soft or forgivable loan from the city or county, and sometimes a grant for smaller work. Every dollar must meet a national objective, almost always benefit to low- and moderate-income households. The strings include an environmental review before spending, Davis-Bacon prevailing wages on construction of eight or more units, Uniform Relocation Act protections for any displaced tenants, lead-based-paint rules for buildings built before 1978, and a recorded affordability covenant.
State and local Housing Trust Funds. Usually a soft or forgivable loan, funded from local revenue such as real estate transfer taxes, recording fees, or an annual appropriation. The rules are set by the jurisdiction rather than by HUD, so they vary, but they typically include an affordability covenant and periodic reporting.
Federal Housing Trust Fund (HTF). A HUD formula source that flows through the state agency, targeted to extremely low-income households, with its own rent limits and a 30-year affordability period. See the HTF page for detail.
Choice Neighborhoods. A competitive HUD grant, awarded to a small number of housing authorities and local governments each year, to redevelop severely distressed public or HUD-assisted housing and the surrounding neighborhood. It carries its own grant agreement and reporting, and it applies on the PHA repositioning path.
Keeping every source in good standing
A single deal can carry several of these at once, each with its own rules, deadlines, and covenants running for years. We help owners and agents keep every source aligned and the property compliant with all of them, from the environmental review at the front end to the affordability reporting that runs for the life of the deal.
Working with a layered stack?
Tell us which sources are in the deal, and we will help you keep every one of them in good standing.
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