1 / 16

CURRENT DEVELOPMENTS IN RURAL HOUSING PRESERVATION

CURRENT DEVELOPMENTS IN RURAL HOUSING PRESERVATION. The Rural Housing Service and Rural Development are, together, the successor to the Farmers Home Administration: Financed approximately 16,500 Section 514 and 515 apartment complexes with some 460,000 units. 28 unit average project size

pilialoha
Download Presentation

CURRENT DEVELOPMENTS IN RURAL HOUSING PRESERVATION

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CURRENT DEVELOPMENTS INRURAL HOUSING PRESERVATION

  2. The Rural Housing Service and Rural Development are, together, the successor to the Farmers Home Administration: Financed approximately 16,500 Section 514 and 515 apartment complexes with some 460,000 units. 28 unit average project size Most of these properties were developed nearly 30 years ago. Portfolio

  3. Portfolio Residents • Portfolio wide occupancy of 95% or better • $10,200 annual average income • 59% elderly • 30% minority • 24% handicapped

  4. Portfolio • Unique Restrictions • RD-Specific Structures • 515 and 514 are Direct Loans • 514 is farm worker restricted, unless a waiver is obtained • Rental Assistance or Section 8 or No Rent Subsidy

  5. ELIHPA • The Emergency Low Income Housing Preservation Act of 1987 (“ELIHPA”). • Even if your documents say you can prepay; ELIHPA says you can’t - - not without asking. • ELIHPA sparked lawsuits, including Franconia, resulting in damages payments to owners

  6. ELIHPA • Handbook – HB-3-3560 – Chapter 15 • Apply to prepay • Must be “complete” – but completeness can vary by office • Must demonstrate “ability to prepay” with loan commitment or assets • You can receive “incentives” – equity take-out loan • From RD – 1% interest rate but little money and long wait • Obtain yourself – must locate and educate lenders

  7. ELIHPA • You may be able to prepay with a “life -estate” use restrictions for current residents • If housing determined to be unnecessary • If no adverse impact on minority persons • And/Or you can offer for sale to a non-profit, at appraised value • Must offer for 6 months • If non profit makes offer, have up to 24 months to close • If neither happens, can prepay

  8. Preservation Tools • 515 mortgage subordination and tax credit re-syndication to reposition properties. • 9% LIHTC are possible with strict adherence to “old and cold” • Bond transactions combining multiple sites have been closed repeatedly

  9. Preservation Tools • We have seen a number of “non-Preservation” preservations, sometimes called 4010s. • Use transfer process. USDA transfer Handbook, HB-3-3560, Chapter 7 • Revision underway to conform to transfer bill, H.R. 3873 • Will be single comprehensive application • Will be timeframe for RD review • 1 property – 45 days • 2-10 properties – 90 days • 11 or more properties – 120 days • Will have guidance on ”tiered” rents for LIHTC properties • Approval requirements will be clarified • New 30 year RUP required • CRCU rents will probably continue to be the standard • Equity can be paid by non-RD sources or from RD sources with appraisal • 20 year CNA • H.R. 4002 Under Consideration

  10. Vouchers • True Preservation –Legislation In the Works – H.R. 4002 • In The Meantime – We Have Tools – Rural Vouchers • The 2008 voucher NOFA came out March 24th • These are rural vouchers used for residents on properties able to navigate ELIHPA prepayment and prepay. • Rent will be based on comparable market rent for the unit the resident occupies and the amount does not increase.

  11. Preservation Tools - MPR MPR – Multifamily Housing Preservation Demo Program • The Rural Housing Service recently issued its 2008 Notice of Funding Availability (NOFA) for the Section 515, 514 and 516 Multifamily Housing Revitalization Demonstration program (MPR). • The main feature continues to be the opportunity to defer current 515/514 debt for 20 years, with small grants amounts available to non profits, and no-interest or soft-second loan to selected applicants. • The MPR this year provides for a further return on investment for additional equity advanced to cover immediate hard cost construction needs. • The MPR recognizes the possibility of third party lenders, and RD will subordinate its debt, but not its use restrictions. • The MPR this year provides a 30 percent on income tenant rent limit on completed transactions. • It also allows applicants to use a community market rent, where the owner can essentially increase rents to market so long as incoming tenants can pay that rent based on 30 percent of income.

  12. 538 • 538 Loan Guarantees • Up to 90% guarantee • Interest credit (interest rate buy down) up to $1.5 million for up to 20% of loans – 2.5% of amortized balance • New construction and acquisition with rehabilitation of at least $6,500/unit • For all hard costs and soft costs- professional services, bond fees, developer’s fees, land acquisition and development, financing costs • Rural areas with a population up to 20,000 • 90% LTV or less of loans made to for-profit entities • 97% LTV or less of loans made to non-profit entities • 25 year minimum, 40 year maximum • 25 year minimum for balloon with 40 year amortization • 1.15% DSCR usually • Initial occupancy cannot exceed 115% of area median income. After initial occupancy, a tenant’s income may exceed these limits. • Rent (including tenant-paid utilities) for any unit at initial occupancy cannot exceed 30% of 115% of area median income, adjusted for family size • Average rent (including tenant-paid utilities) for all units in a project cannot exceed 30% of 100% or area median income, adjusted for family size

  13. Why are These Things Happening? • In 2003, CARH issued its Aging Section 515 Rural Housing Portfolio report calling for a more rational process at USDA and a focus on preservation. In 2004, the congressionally mandated, USDA Comprehensive Property Assessment (“CPA”), recommended ending the ELIHPA prepayment prohibition, funding a tenant-based voucher-style subsidy for prepaid properties, and a mortgage restructuring process similar to HUD’s mark-to-market process. Effective in 2005, RHS issued new regulations and handbooks, on an interim basis, the “3560”, reformatting a number of procedures and streamlining regulations. • For the past several year USDA Appropriations Acts have included some small demonstration-type programs. For example, the Agriculture Appropriations Act for 2006 provided for the MPR and a small rural housing voucher program, which has carried over into FY 2007, and continued in FY 2008

  14. How Can You Get More Involved? • Look at USDA/RHS/RD/old FmHA deals and portfolios with common GPs. Probably we can’t preserve the vast majority without new legislation and new funding. RD is more interested in allowing some to prepay and others to leave in “non-program” sales. • But there are likely a couple thousand properties that can and should be preserved with existing tools.

  15. Richard Michael Price • Nixon Peabody LLP • 401 Ninth Street • Suite 900 • Washington, DC 20004 • Telephone: (202) 585-8716 • Facsimile: (202) 585-8080 • E-Mail: rprice@nixonpeabody.com

More Related