Qualified Allocation Plan Update Indiana Housing Conference September 27, 2018 Peter Nelson, Rental Housing Tax Credit Specialist Alan Rakowski, Rental Housing Tax Credit Manager Matt Rayburn, Deputy Executive Director & Chief Real Estate Development Officer
SESSION OVERVIEW • Year in Review • Biggest changes introduced in the 2018- 2019 QAP • Results from year 1 • Other year 1 news: Market Study Requirements update • 2018 General Set-Aside: Moving Forward 3.0 • Between year 1 and year 2 – enter the Omnibus Bill • Opportunity Zones • 2019 General Set-Aside announced • A look at where we are in year 2 • 2020-2021 QAP – timelines • Presentation Part II: A Panel Discussion with Tax Credit Development and Equity Partners
YEAR IN REVIEW – NEW QAP • New QAP released shortly after last year’s conference • Biggest Changes: • Community Integration Set-Aside (serving individuals with intellectual and developmental disabilities) • Workforce Housing Set-Aside • Total number of points decreased from 195 to 143; minimum score to meet threshold is 80 • New Scoring Categories - Housing Needs Index • Population growth • Rent burdened • Insufficient number of units for extremely low income - Non-IHCDA Rental Assistance - Smoke-Free Housing • Bond deals not subject to the $1.2 million credit cap; developer fee limited to 15% of eligible basis • 2018 General Set-Aside: Moving Forward 3.0 (Lake County)
RESULTS FROM YEAR 1 SET-ASIDES # Applications 2018 competing in set-aside Set Aside Category (received Nov. 6, 2017) 26 (2 awarded) Qualified Not-for-profit 18 (2 awarded) Rural 17 (2 awarded) Small City 15 (2 awarded) Large City 14 (2 awarded) Community Integration 7 (2 awarded) Preservation 4 (2 awarded) Workforce Housing 2 (2 awarded) Housing First 2 (1 awarded) Stellar Community Designation N/A General (Moving Forward 3.0) IHCDA received 51 applications and awarded 17
SCORING CATEGORIES • Housing Needs Index (maximum 3 points) • Average points for 17 awarded deals: 1 • Non-IHCDA Rental Assistance (2 points) • 6 of the 17 awarded deals earned points for this • Smoke-Free Housing (3 points) • 16 of the 17 awarded deals earned points for this • Final Score • 49 of the 51 applications met the minimum score • The average score of an awarded deal was 101.85 • Removing deals competing in Housing First or Stellar, the average score of awarded deals was 105.
RESULTS FROM YEAR 1 BOND APPLICATIONS Number of Year QAP Average Average Bond # of tax TDC Applications credit Received as units of Sept. 1st 18 2018 2018- 118 $20.5 2019 million 20 2017 2016- 102 $16.3 2017 million 17 2016 2016- 122 $20.9 2017 million Take-aways: • IHCDA continues to see a steady supply of bond applications • Bond volume requests not as sensitive to changes in the QAP
OTHER YEAR 1 NEWS – MARKET STUDY REQUIREMENTS & UPDATES • As of April 30, 2018, all firms on IHCDA’s approved market study list must be certified by the National Council of Housing Market Analysts (NCHMA) • This was done as part of IHCDA’s 2017 initiative to update the approved market study list • List had not been updated for several years; all firms required to re-apply to stay on the list; inactive firms removed • Can seek certification for up to 3 types of programs: • Traditional LIHTC • Permanent Supportive Housing • Residential Care Facilities • Other updates: IHCDA entered into a contract earlier this year with a 3 rd party market study firm to assist • with market studies on an as-needed basis (i.e. multiple applications in the same market and the market studies are conflicting, concerns from the constituents questioning demand, IHCDA’s internal review is contested)
2018 GENERAL SET-ASIDE MOVING FORWARD 3.0 • Continued partnership with Energy Systems Network (ESN) that began in 2015 • In response to Governor Eric Holcomb’s Executive order for Declaration of Disaster Emergency in East Chicago in February 2017, IHCDA used the General Set-Aside to encourage new developments in the East Chicago area • Similar to Moving Forward 1.0 and 2.0, but 3.0 dedicated to creating 2 developments in Lake County, with 1 to be located in East Chicago • RFQ released on May 11, 2017 seeking 2 developers to develop and implement long-term strategies to overcome poverty while creating housing that increases quality of life while decreasing the cost of living for low to moderate income individuals in Lake County • 6 development teams presented their plans and qualifications to IHCDA at the Carrie Gosch Elementary School in East Chicago on August 7, 2017 • IHCDA announced the 2 selected teams on September 1, 2017 • Intensive 2-day workshop with developers and subject matter experts held at Carrie Gosch School in November 2017 • Plans being finalized for developments in East Chicago & Gary • RHTC applications to be submitted to IHCDA in October of 2018
BETWEEN YEARS 1 & 2 – OMNIBUS SPENDING BILL • Passed on March 23, 2018 • Key features related to the tax credit program • 12.5% increase in state housing credit authority for four years beginning in 2018 • Income averaging as a new minimum set-aside • IHCDA Response – 12.5% increase • Released RED notice on March 27, 2018 • The 12.5% increase in 2018 credits will be rolled into the 2019 tax credit round (after setting aside part of the increase for the 2018 General Set-Aside - Moving Forward 3.0) • Amount available for 2019 - $18,000,408 (6,666,818 x $2.70) - Add $3,614,654 (2018 unused credit authority) - Subtract $1,800,000 (Moving Forward 3.0) - $19.8 million available for 2019 tax credit applications (with $1.8 million to be set-aside for Moving Forward RD)
BETWEEN YEARS 1 & 2 – OMNIBUS SPENDING BILL • IHCDA Response – Income Averaging • Released RED notice on April 27, 2018 for applicability to 4%/Tax Exempt Bond Developments • Approved for new applications • Approved for developments that have received an award but not yet submitted a final application - Must submit a modification request - Income averaging minimum set-aside request form - Updated pages of Form A - Update from market analyst - Acknowledgment from equity investor - 6 modifications received thus far under the policy
BETWEEN YEARS 1 & 2 – OMNIBUS SPENDING BILL • Released RED notice on May 2, 2018 for applicability to 9% Developments • Approved for new applications • Approved for developments that received a reservation of 9% credits in February 2018 - Must submit a modification request - Income averaging minimum set-aside request form - Updated pages of Form A - Update from market analyst - Acknowledgment from equity investor - Cannot result in any change in score, including scoring related to rent restrictions - 2 modifications received thus far under the policy • Not allowable for developments receiving a reservation of credits prior to the 2018 round
OTHER NEWS – OPPORTUNITY ZONES • Added to the tax code as part of the Tax Cuts Jobs Act on December 22, 2017 • Economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment • 156 census tracts nominated by Governor Holcomb have been certified and designated as Opportunity Zones • Potential impact on LIHTC and affordable housing? Should Opportunity Zones be recognized in the QAP? Stay tuned.
OTHER NEWS – MOVING FORWARD RURAL DEVELOPMENT (RD) • 2019 General Set-Aside • Partnership with ESN and US Department of Agriculture Rural Development (USDA- RD) RFQ released on April 27 th seeking 3 developers to preserve a minimum of 30 USDA- • RD Properties • Financing model to combine 4% credits and 9% credits • IHCDA to seed three $1 million revolving loan funds • Focus on quality of life, built environment, finance & policy, utility systems (including rural broadband), and systems integration • 7 respondents presented to IHCDA on July 25 th • 3 teams selected to participate on August 15 th
YEAR 2 (2019 TAX CREDIT ROUND) SET-ASIDES # Applications 2019 competing in set-aside Set Aside Category (received July 30, 2018) 23 Qualified Not-for-profit 21 Small City 17 Large City 13 Community Integration 12 Rural 7 Preservation 5 Workforce Housing 4 Housing First 2 Stellar Community Designation N/A General • IHCDA received 51 applications on July 30 th • 22 applications have selected income averaging • Awards to be announced on November 15 th
2020-2021 QAP TENTATIVE TIMELINE • November-December: IHCDA to actively seek feedback on QAP and suggestions for the 2020-2021 QAP December: Writing of 1 st draft by QAP team • Early January: Release of 1 st draft, followed by a public meeting and a 2-week public • comment period Early February: Release of 2 nd draft, followed by a public meeting and a 2-week public • comment period • March 2019: Present to the IHCDA Board of Directors for approval to submit to the Governor for final approval • April 2019: Release of the 2020-2021 QAP • July 29, 2019: Anticipated due date for 2020 applications • Watch for RED Notices finalizing dates and times
THANK YOU ALAN RAKOWSKI, RENTAL HOUSING TAX CREDIT MANAGER ARAKOWSKI@IHCDA.IN.GOV PETER NELSON, RENTAL HOUSING TAX CREDIT SPECIALIST PNELSON@IHCDA.IN.GOV
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