Today, HUD issued a notice in the Federal Register covering important Public and Indian Housing program updates, including:
By way of background, SLRs are meant to ensure the amount of HUD assistance is not more than necessary to make a PBV project feasible in consideration of other government assistance. SLRs are required prior to the execution of an agreement to enter into a HAP contract (AHAP) if there is other government assistance. Please note, this guidance does not affect HAP contracts renewed under MAHRA and administered by the HUD Multifamily Division.
The notice sets forth the process for an applicant applying for SLR. For a PBV project, the applicant submits the Form HUD 2880 and related documentation to the Public Housing Authority, who can then ask the local HUD Field Office or a Housing Credit Agency (HCA) to process the SLR. For mixed-finance deals, only the HUD Field Office may conduct the review. If at any time, even after the HAP execution, the owner receives supplemental HUD or new government assistance that results in an increase to project financing greater than 10% of the approved SLR development budget, the owner must apprise the PHA and HUD or the HCA in writing. At the time of initial SLR submission, the PHA must also submit evidence that a request for environmental review has been submitted to the field office.
The SLR includes HUD review of the operating and development budgets to determine whether costs are within a reasonable range considering the project size, characteristics, location, financing, and other factors. The notice sets forth safe harbor standards for costs and allows for costs exceeding safe harbor to provide additional justification and HUD approval or if an HCA is conducting the SLR, approval outside safe harbor so long as the costs are consistent with the HCA’s published allocation plan. The notice makes some changes to the existing Safe Harbor standards and also provides additional detail regarding acceptable assumptions and analysis in determining whether Safe Harbor standards are met.
Safe Harbor highlights include:
The notice also provides a summary of the HCA’s processing of SLRs. HCAs may perform SLRs for proposed PBV projects only if there is LIHTC in the deal. Currently, 29 states have a HUD-approved HCA, and the remaining 21 must seek HUD SLR review.
The notice provides a checklist for the required elements of an SLR application.