The California Tax Credit Allocation Committee (TCAC) will meet on Wednesday, October 21, 2015 to consider and adopt the final proposed regulations, published on October 9, 2015.
Upon publication on July 6, 2015, the original proposed regulatory changes were met with strong opposition from many affordable housing developers and their partners. The opposition primarily focused on the “back-end” provisions, which TCAC proposed in order to further its substantial interest in ensuring its tax credit projects remain habitable and in good repair for the life of the long term affordability restrictions. However, the “equity sharing” requirements of the back-end provisions would have significantly limited the amount of equity distributions from a project following the completion of the initial 15-year compliance period. TCAC has since withdrawn several of its original proposed regulation, including:
· The limitation on the cumulative distributions of refinancing and sale proceeds for projects where assisted rents exceed tax-credit rents; and
· The exclusion of the value of the property tax welfare exemption from the appraisal unless the exemption was reflected in the purchase price when the current owner acquired the property.
Despite withdrawing some of its proposed regulatory changes, TCAC remains committed to ensuring that both the short- and long- term capital needs of its tax-credit projects are addressed prior to TCAC granting approval for refinancing, sale, or preservation. The final proposed regulation would accomplish this goal through the imposition of a capital needs covenant, the establishment of a “short-term work reserve account”, and requiring regular deposits into a “long-term work reserve account”.
There are also a number of other proposed changes to the 9% and 4% tax credit programs, which include:
· Setting the maximum sustainability points at 5 points;
· Increasing the maximum permitted developer fee for 4% projects and increasing the threshold limits for deferred developer fees;
· Reducing the 3-bedroom requirement for large family projects to 25%;
· Setting the housing type goal at 20% for tie-breaker purposes, both statewide and within the rural set–aside;
· Grandfathering for one year Difficult Development Area status of any 9% project that will lose its status in a subsequent year;
· Staggering 180 day readiness deadline; and
· Increasing the special needs “goal” to 25% of the total annual competitive credit.
The final proposed regulations can be found at Final Proposed Regulations.