N.J. Admin. Code § 5:80-33.9

Current through Register Vol. 56, No. 21, November 4, 2024

Section 5:80-33.9 - Volume cap credits

(a) Projects financed by tax-exempt bonds that request tax credits pursuant to Section 42(h)(4) of the Code are required by Section 42(m)(1)(D) of the Code to satisfy the requirements for allocation of a housing credit dollar amount under the qualified allocation plan. Projects requesting tax credits entirely from volume cap do not have to compete and there are no cycle deadlines. However, complete applications shall be submitted at least one month before the tax-exempt bonds are sold. The following information shall be included in order for the application to be deemed complete: all applicable sections of the application corresponding to eligibility requirements at N.J.A.C. 5:80-33.12; those sections of the application corresponding to the point categories for conversion to tenant ownership (if applicable), tax abatement (if applicable), and the negative point categories; a period of restriction meeting the criteria corresponding with the maximum points stipulated at N.J.A.C. 5:80-33.15(a)1 i; and a sponsor certification and breakdown of costs and basis. For family projects, except for preservation and historic rehabilitation projects, which shall retain, at a minimum, their existing percentages of two-bedroom and three-bedroom units, the combined number of efficiency and one-bedroom tax credit units shall be no greater than 20.00 percent of the tax credit units; at least 30.00 percent of the tax credit units shall be two-bedroom units; and at least 20.00 percent of the tax credit units shall be three-bedroom units. A copy of the appraisal/market study required by the applicant's lender and/or syndicator may be submitted in lieu of the market study required at N.J.A.C. 5:80-33.12(c)1 ii.

1. The governmental unit issuing the bonds is required by Section 42(m)(2)(D) of the Code to determine the credit amount needed for feasibility and viability of the project. If NJHMFA is the bond issuer, NJHMFA shall make this credit determination. If NJHMFA is not the bond issuer, the bond issuer shall provide a letter to NJHMFA assigning its responsibility under Section 42(m)(2)(D) to NJHMFA.

2. In order for a project to qualify for all of its tax credits from volume cap, Section 42(h)(4) of the Code requires that 50 percent or more of the aggregate basis of the building and the land on which it is located be financed with tax-exempt bonds. Qualifying tax-exempt bonds are obligations the interest on which is exempt from tax under Section 103 of the Code if such obligation is taken into account under Section 146 of the Code, and the principal payments on such financing are applied within a reasonable period to redeem obligations the proceeds of which were used to provide such financing.

3. Projects that request both volume cap credits and ceiling (competitive) credits shall comply with the application requirements for both.

4. Projects that would have received negative points pursuant to N.J.A.C. 5:80-33.15(a)15, 17, 18, 19, or 20 shall not be issued tax credits until such items are corrected.

5. Projects that receive volume cap credits shall pay an allocation/issuance fee as described at 5:80-33.25.

(b) A mixed-income project, mixed-use project, or affordable project linked to a market-rate or commercial component that is part of a municipal fair share housing development plan or a court-approved judgment of repose or compliance, including, but not limited to, developments that have received a density bonus, may not receive volume cap credits unless the applicant can conclusively demonstrate that the market rate residential or commercial units are unable to internally subsidize the affordable units and the affordable units are developed contemporaneously with the commercial or market-rate residential units. This subsection shall not be evaded by failing to apply all or any portion of the subsidy to the low- or moderate-income units, by diverting all or any portion of the subsidy to other uses, or by using any other device in which all or any portion of the subsidy is not used to benefit low- or moderate-income housing.

1. In determining whether an applicant has conclusively demonstrated that the market-rate residential or commercial units are unable to internally subsidize the affordable units, NJHMFA shall make an initial presumption that the municipally approved inclusionary zoning, in and of itself, creates a realistic opportunity for the affordable units to be built and that such zoning is sufficient to support the internal subsidization of the affordable units required to be built under the fair share plan or the judgment of repose or compliance applicable to the municipality in which the project is situated.

2. The presumption set forth at (b)1 above may be overcome if the applicant demonstrates, to the satisfaction of NJHMFA, the existence of any one or more of the circumstances at (b)2i, ii, or iii below:

i. Tax credit equity is necessary to subsidize any affordable units to be built in excess of the municipal obligation;

ii. Economic conditions have changed since approval of the municipally approved inclusionary zoning to such an extent that the zoning, taking into account any density bonus awarded, no longer supports sufficient internal subsidization to sustain construction of the requisite affordable units; or

iii. The municipally approved zoning erroneously determined that the internal subsidy would be sufficient to sustain building the affordable units.

3. It is the applicant's responsibility to provide sufficient documentation to support the existence of any of the circumstances at (b)2i, ii, or iii above. Failure to respond to NJHMFA requests for additional information supporting the circumstances at (b)2i, ii, or iii above will result in the presumption of the requirement at (b)1 above being de facto affirmed. Any analysis submitted by the applicant shall expressly consider the possibility of a reduced award of low-income housing tax credits (LIHTC) and alternate sources of funding (such as additional deferred developer fees), if necessary to ensure project feasibility, taking into account the internal subsidy provided by the market-rate units.

4. The sponsors of all inclusionary developments seeking tax-credit financing shall submit the information in this paragraph to enable NJHMFA to determine the need, if any, for tax credits. NJHMFA shall determine the amount of tax credits, if any, to be awarded to a project as part of the needs analysis required pursuant to 26 U.S.C. § 42(m)(2).

i. Basic development information, including, but not limited to, the following:

(1) A site plan for both the affordable and market-rate components; and

(2) A timetable for the affordable and market-rate components, which shall include the timing of any phased development and the availability of units for rent or sale;

ii. A description and the documentation of any financial ties and/or subsidies, including, but not limited to, the sale or transfer of land, shared infrastructure improvements, and financing, between the affordable and market-rate components;

iii. A description and the documentation of any business arrangements regarding additional components of the market-rate development;

iv. Information on all market-rate components linked to the affordable component;

v. A description and the amount of all subsidy requests, including, but not limited to, the following:

(1) Any density bonus, payment in lieu of taxes (PILOT) agreement, affordable housing trust fund contribution, State or Federal grant, and low-income housing tax credit application; and

(2) Copies of any Form 10 submission(s) for the affordable component;

vi. Terms and conditions of the purchase of land and the current market value of land proposed to be utilized in the development, including, but not limited to, the following:

(1) Documentation of any prior land purchase and/or current land purchase agreement, including date(s) of sale, price, acreage, parcel boundaries, and any terms or conditions of sale; and

(2) An estimate of the current market value of the land, with justification as to how the estimate was derived (for example, appraisal, recent sale, sale of comparable parcels of land, alternative uses, etc.);

vii. Documentation of municipal approvals, including, but not limited to, the following:

(1) Fair Share Plan and/or judgment of repose or compliance applicable to the municipality in which the project is situated;

(2) Local planning board approvals for the affordable units and any associated market-rate or commercial units; and

(3) Land use approvals for the affordable units and any associated market-rate or commercial units;

viii. Information on market conditions in support of anticipated revenue levels, including, as applicable, comparable properties, market-level pricing information, and market studies;

ix. A pro forma for both the market-rate and the affordable components of the development, including, but not limited to, the information in (b)4x(1) through (4) below for both. All calculations are to be provided electronically, with live Excel sheets:

(1) Development costs;

(2) Development financing, including equity and/or loans, with amounts and anticipated interest rates;

(3) Operating/sales costs; and

(4) Anticipated revenue from rentals or sales, including ancillary sources and/or unit upgrades;

x. A feasibility analysis conducted by an independent third-party skilled in market and financial analysis, certified to NJHMFA, and including, but not limited to, the information at (b)4x(1) through (3) below. All calculations are to be provided electronically, with live Excel sheets:

(1) The calculated internal rate of return (IRR) for both the market-rate project and the combined project, with and without the requested LIHTC;

(2) A narrative explanation, signed by the applicant, of the reason(s) for the insufficiency of the combined project returns absent the requested LIHTC. The narrative shall explain the basis for the insufficiency and shall be tied to the financial analysis; and

(3) Any other financial analyses used to support the narrative explanation.

(4) The feasibility analysis must reflect and be consistent with the pro formas referenced at (b) 4ix above.

xi. NJHMFA reserves the right to request any additional information from the applicant as deemed necessary to conduct the needs analysis.

(c) Applicants that have a general partner, voting member, property manager, developer, principal, or a related party of any of the foregoing who owned or managed any interest in an LIHTC project when title was foreclosed thereon by entry of judgment or deed in lieu of foreclosure shall not be eligible for tax credits for a period of seven years from the date of entry of the judgment of foreclosure or the date of the deed in lieu of foreclosure, whichever shall have occurred first. Applicants that have a general partner, voting member, property manager, developer, principal, or a related party of any of the foregoing who owned or managed any interest in an LIHTC project that the Tax Credit Committee (Committee) determined exhibits a pattern of uncorrected noncompliance shall not be eligible for tax credits for a period of three years from the date all issues of noncompliance are deemed by the Committee to have been corrected.

N.J. Admin. Code § 5:80-33.9

Amended by 47 N.J.R. 2491(b), effective 10/5/2015

Amended by 49 N.J.R. 435(a), effective 3/6/2017

Amended by 51 N.J.R. 1500(b), effective 10/7/2019

Amended by 56 N.J.R. 343(b), effective 3/4/2024