HUD announced a new Multifamily Low Income Housing Tax Credit Pilot Program on February 3, 2012, in HUD Notice H 2012-1 and Mortgagee Letter 2012-1. The Pilot will use the Section 223(f) mortgage insurance program to streamline the process for certain LIHTC deals. The Pilot will permit more rehabilitation than currently allowable under the Section 223(f) program and will create separate, expedited application procedures for tax credit transactions. The key provisions are described in this alert.
HUD has announced a new Multifamily Low Income Housing Tax Credit Pilot Program to implement the Housing Tax Credit Coordination Act of 2008. The guidelines for the Pilot are set forth in HUD Notice H 2012-1 and Mortgagee Letter 2012-1, both dated February 3, 2012. HUD is adapting the Section 223(f) mortgage insurance program to be the vehicle for the Pilot, by both increasing the program’s parameters and expediting application processing. Ordinarily, the Section 223(f) program cannot be used for substantial rehabilitation projects; however, HUD is expanding its usual concept of moderate rehabilitation to allow certain tax credit projects to take advantage of the streamlined 223(f) process. Notice H 2012-1 also extends the 3-year rule waiver for the 223(f) program for an additional year beyond its February 2012 expiration.
The first phase of the Pilot will be limited to certain HUD offices with tax credit experience. The Pilot is available for: (i) permanent financing for recently constructed projects, (ii) preservation and moderate rehab for Section 8 properties, and (iii) re-syndication projects. The key features of the Pilot include:
- up to $40,000 per unit in hard construction costs,
- possibility of not being subject to Davis-Bacon wage rates,
- construction with residents in place or no more than 2 weeks temporary relocation,
- MAP Guide underwriting,
- replacement of existing multi-year Section 8 HAP contracts with new 20-year contracts,
- maximum loan of $25 million, and
- targets of firm commitment issuance within 60–90 days of application submission and a closing within 90–120 days.
We believe that the Pilot presents an exciting opportunity to take advantage of FHA and LIHTC financing in a more efficient manner, and we look forward to working with developers and HUD to successfully implement it.
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