Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About

Trending Topics

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni

    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor & Employment
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations

    Industries

    View All

    • Cannabis
    • Consumer
    • Energy
    • Entertainment
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Non Profit
    • Real Estate
    • Technology

    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    1. Home
    2. Insights
    3. Articles
    4. HUD issues PIH SLR guidanceArticles

    Article

    HUD issues PIH SLR guidance

    Feb 28, 2020

    Share

    By Nathaniel Cushman

    HUD issued a notice in the Federal Register covering Public and Indian Housing program updates.

    Today, HUD issued a notice in the Federal Register covering important Public and Indian Housing program updates, including:

    • Updated guidelines and requirements for project-based voucher (PBV) subsidy layering reviews (SLR)
    • New PBV Housing Assistance Payments (HAP) contract term provisions from the Housing Opportunity Through Modernization Act of 2016 (HOTMA)
    • Updated SLR requirements for mixed-finance projects whether or not they have PBV assistance
    • Updated expectations regarding cash flow, debt coverage ratios, net operating income and operating expense trending requirements

    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:

    • GC Fees: up to 14% of hard construction costs
    • Developer Fee: up to 15% for PBV contract, up to 9% for PBV in mixed-finance project, up to 12% with justification, over 12% if PHA receives it and is restricted for project’s costs or future phases.
    • Debt Coverage Ratio: 1.10 to 1.45, with permitted trending of operating expenses between 1-3% per year, rent increases between 2-3% per year, and vacancy not in excess of 7% per year.
    • Cash Flow: may not exceed 10% of total operating expenses, not counting deferred developer fee, operational and replacement reserves (so long as adjusted annually). HUD will reduce PBV rents or the number of PBV in order to facilitate compliance with this provision.
    • Mixed Finance: the SLR is handled through the mixed-finance review process in HUD’s Office of Public Housing Investments at HUD HQ and includes Choice Neighborhoods. Mixed-finance projects must comply with the Cost Control and Safe Harbor Standards, dated April 9, 2003, the total development cost and housing construction cost limits in HUD Notice PIH-2011-38, and the HUD pro-rata test. LIHTC pricing cannot be less than 51¢ on the dollar.

    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.

    Affordable HousingHUD

    Practices

    Affordable Housing

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • © 2023 Nixon Peabody. All rights reserved
    • Privacy Policy
    • Terms of Use
    • Statement of Client Rights
    • Supplier Diversity Program
    • Nixon Peabody International LLC
    • PAL