The National Council of State Housing Agencies (NCSHA) has updated its Recommended Practices in Housing Credit Administration for voluntary adoption by Housing Credit Agencies.
The organizations first recommended practices were published in 1993, and included recommendations relative to allocation and underwriting. These recommended practices were updated in 1998.
In 2000, NCSHA published its first recommended practices relative to Housing Credit compliance monitoring, and in that same year, provided further updates to recommendations relating to allocation and underwriting, with additional recommendations provided in 2009 and 2010.
This new series or recommendations includes significant revisions to many recommended practices in allocation, underwriting, and compliance monitoring. There are also 13 new Recommended Practices. This new report was approved by the NCSHA Board of Directors in December 2017.
It is important to remember that these recommendations are voluntary, and no Housing Credit Agency (HCA) is obligated to adopt them.
The report outlines recommendations in 46 separate areas; highlights of some of the major changes in recommended policies are noted in this memo.
Development Costs: the report recommends that "In addition to carefully calculating the amount of housing credit allocated to eligible developments, as federal law requires, each allocating agency should develop a standard for limiting development costs to reasonable amounts. This standard may take the form of a development cost limit, calculated on a per unit, per bedroom, or square footage basis." The report also urges each allocating agency to have a general developer fee limit (which virtually all have already done). Agencies are also being urged to define what an acceptable consulting fee is and to review those fees - including at minimum fees for architectural, engineering, environmental, accounting, legal, market analysis, construction management, and asset management services - at project application and compare them with professional fees charged in developments awarded credits in prior funding cycles and with current applications.
Preservation: The report recommends that HCAs should develop QAP policies on the use of 9% and 4% credits for preservation, including specific policies on resyndication of existing LIHTC projects.
Qualified Contracts: In one of the more controversial areas of the report, NCSHA recommends that agencies "require all applicants to waive their right to submit a qualified contract as a condition of receiving an allocation. The waiver requirement should apply to applicants for both 9% and 4% credits financed with tax-exempt multifamily bonds." Many HCAs already require applicants to waive the right to seek a qualified contract at the time a credit allocation is made, while others provide scoring incentives for applicants that agree to waive the right to a qualified contract. This recommendation is particularly interesting in that it recommends requiring that developers be required to waive a right provided by federal law in order to participate in a federal program. To date, I know of no one who has challenged the legality of such a provision, but it would make for an intriguing case.
Reducing Local Barriers to Development:
NCSHA also seeks to address concerns about local requirements and support for LIHTC proposals.
While inviting local jurisdiction comment on proposed LIHTC developments is required by statute, agencies should not require local approval (for example, a letter of support) as a threshold qualification or allocate points for local approval as part of a competitive scoring system. Moreover, agencies should not require local financial contributions as a condition for receiving a housing credit allocation, says the report. This practice came under harsh criticism in a recent GAO report on State Agency implementation of the program.
Construction Monitoring: Construction monitoring is a new recommended practice.
In addition to visiting proposed development sites prior to allocation of credits, HFAs should inspect or require an independent third-party inspection of credit developments during the construction period to monitor construction progress, verify application commitments, evaluate compliance with fair housing and accessibility rules, and identify construction delays, says the report. To avoid duplication of efforts, agencies may coordinate with investors, syndicators, lenders, or other entities to receive copies of construction monitoring reports conducted by these entities.
Agencies have found that site visits to developments during the construction phase help monitor construction progress and identify potential timing delays. These visits also help make sure that developments adhere to commitments made at the time of application and with fair housing and accessibility rules.
Violence Against Women Act (VAWA) Compliance: The report recommends that agencies adopt specific policies and procedures relative to implementation of VAWA. The recommendation essentially follows the procedures outlined by HUD for implementation of VAWA at HUD properties.
Owner & Manager Training: The report recommends that agencies require that owners and on-site managers of LIHTC projects receive LIHTC specific training no later than issuance of an 8609. The report states that "Agencies should consider requiring certification or professional designation of Housing Credit property managers."
As noted, recommendations are made in 49 separate areas, but most have not changed from prior recommendations. Interestingly, there are no major recommended changes regarding compliance monitoring, and the report generally indicates that agencies should defer to HUD rules in terms of monitoring for resident income eligibility.
Most importantly, owners and managers should keep in mind that these recommendations are just that - recommendations. There is no requirement for any HCA to implement any of the recommendations.