N.Y. Comp. Codes R. & Regs. tit. 9 § 2040.3

Current through Register Vol. 46, No. 53, December 31, 2024

Section 2040.3 - DHCR allocation process

(a)Funding rounds.

The division will publish at least annually in the State Register a notice of credit availability which informs applicants of submission dates and deadlines for future funding rounds.

(b)Documentation.

Applicants requesting an allocation of credit must submit an application in a form approved by DHCR. The division may request any and all information it deems necessary for project evaluation. If any submission or documentation is insufficient to complete any evaluation of the proposed project, processing will be terminated. DHCR will not request or accept updated information related to incomplete or insufficient exhibits or attachments used primarily for rating an application.

(c)Processing fees.

The division shall charge an application fee of $3,000, due at the time of application. The division shall charge a fee of $1,000 if a binding agreement is requested. A credit allocation fee of eight percent of the first year credit allocation amount is due at the time of request for the issuance of carryover allocation. Non-profit applicants (or their wholly-owned subsidiaries) which will be the sole general partner or partners of the partnership/project owner or sole managing member or members of the limited liability company/project owner may request and be approved to defer payment of processing fees until the time of carryover allocation.

(d)Credit allocation process.

Only applications submitted by a published deadline will be evaluated for an allocation. Applications will be reviewed for completeness, eligibility, scoring, project feasibility, site suitability, consistency with the division's underwriting standards and whether a proposed project advances the State's housing goals and objectives, including any goals set forth by the Regional Economic Development Council strategic plan applicable to the area in which the project is located. The division expects to notify applicants within 150 days from the application deadline on allocation decisions. The process the division employs for allocating credit entails the following:

(1) Credit reservation or binding agreement. The division will determine, in its sole discretion, whether to provide the applicant with a credit reservation or binding agreement based upon the readiness of the project and the availability of credit.

(i) Credit reservations will contain deadlines for: closing on construction financing in an amount sufficient to complete the project; attainment of commitments for permanent financing in an amount sufficient to complete the project; construction start; the project owner to incur more than 10 percent of the reasonably expected basis in the project; and submission of documents necessary for the issuance of an allocation of credit.

(ii) Applicants, after meeting the conditions of the credit reservation, may request a binding agreement if the applicant has obtained commitments from all sources of construction and permanent financing and has obtained all necessary local approvals. Generally, a binding agreement will be issued to an applicant qualifying for a credit reservation to facilitate a project's attainment of construction and/or permanent financing.

(iii) If the applicant does not comply with the deadlines contained in the credit reservation or binding agreement, the division may revoke the reservation or binding agreement and require the applicant to re-apply for credits.

(2) Carryover allocation. Carryover allocations issued by the division will contain any special conditions and specific performance standards. A carryover allocation will be issued if the division determines that an applicant has met the requirements contained in the credit reservation and has submitted the proper certification that more than 10 percent of the reasonably expected basis in the project has been incurred by the project owner. In making a determination to issue a carryover allocation the division will consider the project's status with respect to environmental assessments, local reviews and financial commitments. The issuance of a carryover allocation by the division shall not impose upon the applicant more restrictive performance deadlines than those specified in the credit reservation.

(3) Final credit allocation. All projects which receive credit reservation, binding agreement or carryover allocation from the division, enter service and submit necessary documentation will be evaluated for the final time prior to the final credit allocation. The division may request additional information/documents to complete the evaluation of the project. Prior to the final credit allocation, the owner and the division shall execute a regulatory agreement.

(4) Waiting list. Any complete application which meets the threshold eligibility review criteria but is not selected for a credit reservation will be placed on a waiting list which will be in effect until the next funding round, at which time the waiting list will be terminated. Applicants on the waiting list will remain eligible to be selected for a credit reservation if credits are made available to the division from a national credit pool, expired credit reservation or binding agreement, or recaptured credits.

(5) Other notifications. If an application is found to be incomplete, ineligible, or not feasible the applicant will be notified and no further action will be taken on the application. At any stage in the credit allocation process, the applicant must notify DHCR immediately of any proposed material changes to the project including but not limited to, changes in the project scope, ownership structure, development team, financing, budget, design features, and changes affecting threshold eligibility review criteria and scoring and ranking criteria, tenant population, household income levels served and any other significant factors. All proposed material changes are subject to DHCR's approval.

(e)Threshold eligibility review criteria.

At each stage of processing (i.e., application, reservation, binding agreement or allocation) applications will be subject to a threshold eligibility review, which will include, but not necessarily be limited to, whether the project meets the following minimum requirements as well as requirements described in a notice of credit availability, request for proposals, design requirements manual, capital programs manual or other manual or document issued by the division:

(1) The project meets the occupancy, rent restrictions and any other requirements of the code.

(2) The project applicant has site control, consistent with the code, for the project real estate through a lease, option, purchase contract or deed.

(3) At the time of application, the project applicant has identified all required governmental approvals necessary to construct and operate the project. At each subsequent stage of processing, the applicant must secure all required governmental approvals to construct and operate the project.

(4) The project applicant must comply with the code regarding notification of the chief executive officer (or the equivalent) of the local jurisdiction within which the proposed project is located and provides such individual a reasonable opportunity to comment on the project.

(5) The project developer, owner and/or manager have successfully developed and operated projects comparable to the proposed project and have the capacity and experience to undertake, complete and operate the proposed project.

(6) The project developer, owner and/or manager and their principals do not include anyone who owns or manages an existing project for which an IRS form 8823 has been issued and has not been corrected or otherwise resolved as determined by the supervising agency.

(7) The project developer, owner and/or manager and their principals do not include anyone who has participated in a publicly assisted program or project that has been determined to be out of compliance with statutes, rules, regulations, policies or agreements and has not been corrected or otherwise resolved as determined by the public agency responsible for supervising the project. The project developer, owner and/or manager and their principals must inform the division in a timely manner of any notice of non-compliance issued at any time.

(8) The amount of requested annual credit allocation does not exceed either the maximum per project or per unit amounts specified in the notice of credit availability issued by the division. Such amounts will be established based upon the expected availability of credit allocation authority. The applicants may request and the commissioner may grant a waiver of this requirement if the commissioner determines that there is sufficient credit available, the project is in furtherance of the State's housing goals and in the best interests of the citizens of the State of New York. A written explanation shall be available to the general public for any waiver granted pursuant to this paragraph.

(9) The project applicant must provide due diligence reports acceptable to the division including but not limited to an appraisal, if necessary, a physical needs assessment, if necessary, a comprehensive market study (which must be conducted consistent with guidance provided by the division which demonstrates at a minimum that the proposed number and type of units meet an existing and identified need of low-income individuals and can be readily absorbed by existing need in the local area) and a Phase I Environmental Site Assessment which meets current American Society for Testing and Materials (ASTM) standards, dated not more than 12 months prior to the application submission deadline.

(10) There will be no adverse impact on the occupancy rates of other publicly-assisted housing in the local area.

(11) The project does not involve the permanent involuntary displacement of existing tenants in order to qualify for credits.

(12) The number of bedrooms in the units in the proposed project are appropriate for the type of occupancy proposed.

(13) All LIHTC-assisted first floor units in new construction projects without an elevator, all LIHTC-assisted units in new construction projects with an elevator, and as many LIHTC-assisted units as feasible in adaptive reuse or rehabilitation projects shall meet visitability standards, except when such standards are demonstrated to be irreconcilable with Federal, State or local statutes, regulations, ordinances or codes.

(14) If the project includes the rehabilitation of any building(s), the acquisition costs of the building(s) must be reasonable as determined by the division and may not exceed 25 percent of the total development costs of the project; unless:

(i) it is a preservation project (as defined at section 2040.2[r] of this Part); or

(ii) the commissioner has determined that the preservation of the building(s) is in the best interest of the State. A written explanation shall be available to the general public for any allocation of a housing credit dollar amount which is made in accordance with this subdivision.

(15) Project construction has not started without prior authorization by the division.

(16) The project will:

(i) be a qualified low-income housing project subject to a regulatory agreement with the division for no less than 30 years, however, the minimum term may be increased as set forth in the annual request for proposals for each funding round; or

(ii) be conveyed pursuant to an effective plan for existing tenants to purchase the project at the end of the compliance period.

(17) The project's design and construction must comply with green and energy efficiency sustainable building practices and measures appropriate for the type of building proposed as set forth in the annual request for proposals for each funding round. Rehabilitation projects must take into account, among other factors, cost effectiveness based on the scope of reconstruction necessary and the historic nature of the project. All projects must identify how green and energy efficiency sustainable building requirements will be met and agree to provide, prior to construction closing, a certification from a responsible green and/or energy professional that the project will meet such requirements.

(18) The division has completed a credit and background review of the project developer, owner, general contractor and/or manager and their principals with results acceptable to the division.

(19) The project applicant, developer, owner, general contractor, and/or manager and their principals agree not to contract for any services related to the project with any entity on any Federal or New York State debarment lists and include a provision in all contracts related to the project barring the participation of entities on such lists.

(20) The project does not significantly exceed the costs of other proposed projects, unless a determination has been issued by the commissioner finding the project to be in furtherance of the State's housing goals. A written explanation shall be available to the general public for any allocation of housing credit made pursuant to this paragraph.

(21) The project applicant, developer, owner, general contractor and/or manager and their principals are in compliance with all relevant Federal, New York State, division policies and requirements, and local laws and regulations, including but not limited to the prohibition against discriminating against section 8 housing choice voucher holders, nondiscrimination and marketing policies, guidelines and requirements.

(22) The project applicant, developer, owner and/or manager and their principals does not include anyone who, in the sole judgment of the division, has initiated or been the decision maker in requesting a qualified contract under section 42(h)(6)(F) of the code after the effective date of this QAP.

(f)Project scoring and ranking criteria.

Project applications which pass threshold eligibility review shall be scored and ranked based upon the following criteria as may be further described in a notice of credit availability, request for proposals, design requirements manual, capital programs manual or other manual or document issued by the division.

(1) Community impact/revitalization (maximum of 10 points). Scored on the extent the project provides affordable housing in an area that meets the following criteria:

(i) the project proposes the use or reuse of existing buildings, infill new construction, and/or the demolition and replacement of buildings having a blighting impact on a community and the rehabilitation of which is impracticable and advances a neighborhood specific revitalization plan or is complementary to an ongoing neighborhood specific planning and/or revitalization effort ("a Concerted Community Revitalization Plan"). Plans and/or efforts may be led by local government, locally based community organizations and/or individuals. Plans and/or efforts will be evaluated based on whether they seek to fundamentally improve the quality of life and opportunities for neighborhood residents based on the following criteria:

(a) incorporate easy access to public transportation and/or promote walkable communities in which essential goods and services are accessible within a short and safe walking distance;

(b) are consistent with the historic character and density of the neighborhood;

(c) provide evidence of an ongoing, multi-faceted revitalization effort and/or plan that addresses the homeownership, commercial, service, employment, nutritional, recreational, educational and cultural needs of the neighborhood;

(d) result from an open, public process in which neighborhood residents have had meaningful opportunities to contribute to its development;

(e) identifies existing neighborhood strengths upon which the revitalization plan and/or effort is based, including, but not limited to, access to employment opportunities and proximity to viable commercial districts, stable neighborhoods and cultural institutions;

(f) identifies goals to be met and obstacles to be overcome by the plan; and

(g) promotes mixed-income development (up to 5 points).

(ii) the project clearly advances specific housing objectives of a regional economic development council strategic plan applicable to the area in which the project is located (5 points).

(2) Financial leveraging (up to 11 points). Scored to the extent that other funding sources (not including a deferred developer's fee) finance a portion of the project's total development cost, including but not limited to sources such as:

(i) permanent funding from sources other than the division or HTFC;

(ii) the donation of land and/or building(s);

(iii) the provision of a long term lease at a nominal amount;

(iv) the net syndication proceeds as a proportion of the total credit requested; and/or

(v) the amount of credit requested per unit adjusted for unit size.

(3) Sponsor characteristics (up to 9 points). Scored on the applicant's development and management team experience in the timely development and completion of low-income housing within proposed development budgets and project scope, and the management of such housing within approved operating budgets in a manner consistent with all statutes, regulations and policies.

(4) Green building (up to 5 points). Scored on the extent the project identifies and will comply with a sustainable green building strategy identified in the request for proposals for each funding round.

(5) Fully accessible and adapted, move-in ready units (up to 5 points). Scored on whether the applicant has provided evidence that there is sufficient market demand for the number and type of units proposed and has certified it will enter into a written agreement with an experienced service organization(s) to provide appropriate referrals for fully accessible and adapted, move-in ready units:

(i) at least five percent (rounded up to the next whole number) of the project units are fully accessible and adapted, move-in ready, which includes a roll-in shower with an attached seat or is designed to accommodate a roll-in shower with an attached seat which will be installed at the owners expense upon request, for person(s) who have a mobility impairment and the unit(s) will be marketed to households with at least one member who has a mobility impairment; and at least two percent (rounded up to the next whole number) of the project units are fully accessible and adapted, move-in ready for person(s) who have a hearing or vision impairment and the unit(s) will be marketed to households with at least one member who has a hearing or vision impairment. Fully accessible and adapted, move-in ready units shall be equitably distributed among the various dwelling unit types in the project based upon:

(a) evidence of market demand;

(b) guidance of the service organization providing referrals to the project; and/or

(c) applicable Federal or State law (2 points); or

(ii) the percentages of units meeting the requirements of subparagraph (i) of this paragraph are equal to or exceeded 10 percent and 4 percent (rounded up to the next whole number) respectively (a minimum of two units each). Fully accessible and adapted, move-in ready units shall be equitably distributed among the various dwelling unit types in the project based upon:

(a) evidence of market demand;

(b) guidance of the service organization providing referrals to the project; and/or

(c) applicable Federal or State law (5 points).

(6) Affordability (up to 8 points). Scored on the percentage of LIHTC units in the project which will be affordable and targeted to persons with the lowest incomes (e.g., 30 percent, 40 percent, or 50 percent of area median income) and whether the applicant provides evidence that a public housing authority will make referrals to the proposed project.

(7) Individuals with children (up to 7 points). Scored on the ratio of bedrooms to units in a project serving households with children and whether the project is a housing opportunity project or advances a neighborhood specific revitalization plan and/or effort.

(8) Project readiness (up to 10 points). Scored on the extent the application demonstrates the likelihood of a construction closing in the shortest possible timeframe based upon an assessment of the status of financing commitments and whether the project is supported by the implementation of significant measures including but not limited to infrastructure improvements, real property tax relief and rezoning.

(9) Persons with special needs (5 points). Scored if the project will give preference in tenant selection to persons with special needs, with priority being given to such persons who have served in the armed forces of the United States for a period of at least six months (or any shorter period due to injury incurred in such service) for at least 15 percent of the LIHTC-assisted units and whether the persons with special needs will be provided supportive housing or will be offered supportive services as evidenced by a comprehensive service plan and a written commitment or agreement with a service provider experienced in meeting the specific service needs of persons for which preference is provided.

(10) Participation of non-profit organizations (up to 4 points). Scored on the extent of participation of a non-profit organization or organizations:

(i) whether local non-profit organization(s) or or-profit wholly owned subsidiary(ies):

(a) has fostering of low-income housing as one of its tax-exempt purposes;

(b) is not affiliated, established or controlled by a for-profit entity; and

(c) will serve as sole general partner(s) of the limited partnership/project owner or sole managing member(s) of the limited liability company/project owner (4 points); or

(ii) whether local non-profit organization(s) or for-profit wholly owned subsidiary(ies) with demonstrable housing experience and capability has a defined and substantive role in the development or management of the project through the extended use period (2 points); or

(iii) whether non-profit organization(s) that does not qualify as a local non-profit organization(s) under section 2040.2(m) of this Part, or its for-profit wholly owned subsidiary, has a defined and substantive role in the ownership, development or management of the project through the extended use period (1 point).

(11) Mixed income (up to 4 points). Scored to the extent the project would serve households earning above 60 percent of area median income.

(12) Historic nature of project (up to 2 points). Scored on whether:

(i) the project includes the rehabilitation of a historic building (1 point);

(ii) the applicant demonstrates that the project will include a building that will be eligible for, and the applicant will seek, a Federal tax credit for the rehabilitation of historic buildings (1 point).

(13) Cost effectiveness (5 points). Points will be awarded to individual projects based upon a comparison of project costs to the costs proposed in other project applications.

(14) Housing opportunity projects (up to 5 points). Scored to the extent the project is in close proximity to public transportation, is located in a community with a low incidence of crime, and/or is located in an area of opportunity as set forth in a request for proposals issued by the division.

(15) Investment in underserved areas (5 points). Scored on whether there is limited or no subsidized affordable housing production and an unmet demand for affordable housing in the past 10 years within the primary market area of the proposed location of the project.

(16) Minority- and women-owned business enterprise and service-disabled veteran-owned business participation (up to 5 points). Scored to the extent the project development team includes New York State certified minority- and/or women-owned businesses and service-disabled veteran-owned businesses.

(g)Determination of the amount for credit allocation.

(1)

(i) Evaluation of project. All projects considered for an allocation of credit shall be evaluated pursuant to the code at the following times: at application; at allocation; and after the building is placed in service. The division will consider the project ranking, analyze operating economics, financing and development cost for reasonableness and determine the amount of credit necessary for the financial feasibility of the project and its viability as a qualified low-income housing project. The division will require that the operating economics of the project be fiscally sound and in compliance with LIHTC regulatory requirements; and, that all project costs, including developer's fee, are necessary and reasonable based upon the project size, project characteristics, location and risk factors. Capitalized operating reserves shall be limited to real estate operations and may not be used to fund social services. The sources of all proposed financing for the project will be reviewed to ensure that the assistance proposed for the project does not exceed that amount necessary for project feasibility.

(ii) Preference in allocation of credit dollar amounts. Among the projects selected for a credit allocation, the code mandates that preference in the dollar amount of the credit allocation will be given to projects which:

(a) serve the lowest income tenants;

(b) are obligated to serve qualified tenants for the longest periods; and

(c) are located in a qualified census tract and their development contributes to a concerted community revitalization plan.

These evaluations will be based upon the project's specific economic needs subject only to statutory limitations.

(2) Cost standards. If HUD assistance is proposed for the project, DHCR will apply HUD subsidy review layering guidelines. Otherwise the division shall apply the following standards when calculating the maximum amount of the credit necessary for the project:

(i) Construction related items (costs). The maximum allowable construction related costs shall be, in relation to the contractor's contract: builder's profit of 6 percent; builder's overhead of 2 percent; and general conditions of 6 percent, or any combination of these costs totaling no more than 14 percent, based upon actual and reasonable construction costs.

(ii) Developer's fee. The amount of developer fee compensation for services, overhead, and profit recognized in the adjusted project cost shall be 10 percent of the acquisition and improvement cost associated with the low-income portions of the project. This can be increased up to a ceiling of 15 percent of improvement cost of the low-income portion where either the developer or its affiliate provides to the satisfaction of the division both a cost completion guarantee and an operating deficit guarantee as those guarantees are set forth in the project owner's organizational documents. Notwithstanding any other provision of this Part, the amount of the developer's fee for a high acquisition cost project shall be based upon the division's assessment of risk assumed by the project owner, considering factors including, but not limited to, rent subsidies or other project operating support, location, financing sources, occupancy level, project type, and identity of interest.

(iii) Identity of interest. The division may reduce any allowable costs, including but not limited to the developer's fee, where an identity of interest has been found among the parties to the transactions involving the acquisition, syndication, financing, development, construction and/or operation of the project, if it is determined that such costs exceed reasonable amounts. At the time of application, all applicants will be required to submit an affidavit disclosing the nature of any identity of interest. Where there exists such an identity of interest, the applicant will be required to demonstrate expenditures to be customary given the financial structure of the project. At the time of carryover allocation and at the time of the submission to the agency of the request for IRS Form 8609, the applicant must disclose any additional identities of interest among the parties to transactions involving the syndication, financing, development, construction and/or operation of the project.

(3) Syndication standards. The division will require that the value received on sale of the credit from projects receiving an allocation from the division be valued at market rates or greater. The amount of equity capital contributed by investors to a project partnership shall not be less than the amount generally contributed by investors to similar projects as determined by using sales of comparable credit projects and the division's evaluation of market trends. The division will base all calculations of the minimum net syndication proceeds available to the project on the assumption that 99.9 percent of the project has been sold to investors.

(4) Calculation of credit amount. The credit amount for a project shall be the lesser of the eligible allocation or the gap amount.

(i) Eligible allocation. The eligible allocation is the maximum amount the project is eligible for under the code. It is determined by multiplying the qualified basis of the project by the applicable credit percentage.

(ii) Gap amount. The gap amount is determined by subtracting the amount of supportable debt and other associated financing from the adjusted project cost and then dividing this financing gap by a factor based upon either the market or syndication pricing proposed for the project, whichever is higher.

(5) General. The division reserves the right to allocate credit in a manner which affirmatively advances fair housing, yields an equitable distribution of credit throughout the State, to ensure the participation of qualified non-profit organizations, to implement such special priorities or demonstration programs contained in the notice of credit availability or request for proposals and to advance coordinated investments by State, Federal, and local governmental partners. The division also reserves the right to assign scoring points as set forth in subdivision (f) of this section to the extent a project addresses the division's underwriting and design standards, as set forth in a request for proposals. Any special priorities or demonstration programs shall be consistent with the priorities and selection criteria set forth herein and shall be described in detail in the notice of credit availability and request for proposals. Notwithstanding the scoring system set forth above, DHCR reserves the right to deny any request for an allocation of credit irrespective of its point ranking if such request is inconsistent with the State's housing goals including the housing objectives of a Regional Economic Development Council applicable to the area in which the project is located and shall have the power to allocate credits to a project irrespective of its point ranking, if such intended allocation is: in compliance with the code; in furtherance of the State's housing goals including the housing objectives of a Regional Economic Development Council applicable to the area in which the project is located; and determined by the commissioner to be in the interests of the citizens of the State of New York. A written explanation shall be available to the general public for any allocation of a housing credit dollar amount which is not made in accordance with established priorities and the selection criteria set forth herein.

(6) Set-asides. For the purpose of implementing the State's housing goals, including the housing objectives of the Regional Economic Development Council applicable to the area in which the project is located, the division reserves the right to set aside credit, including, but not limited to, set-asides for housing opportunity projects, preservation projects and supportive housing projects.

N.Y. Comp. Codes R. & Regs. Tit. 9 § 2040.3

Amended New York State Register May 26, 2021/Volume XLIII, Issue 21, eff. 5/26/2021