State Housing Finance Agencies (HFAs) continue to release information regarding how they will approach the new minimum set-aside election - the "Average Income" election. As of August 1, 2018, 20 HFAs have provided some guidance on how the new election will be dealt with in individual states and one (Virginia) has provided proposed QAP changes relating to the Average Income (AI) set-aside. Following is the guidance that I currently have with regard to the approach individual HFAs will be taking relative to AI (as a disclaimer - it is possible that more states have provided guidance that I am unaware of).

• Alaska: will not permit the AI set-aside to be used.
• California
  • May be used only on 9% projects;
  • Projects using AI to house 60 to 80% AMI tenants in rent-restricted units must maintain the AI at or below the 50% level;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points; and
  • All BINs must be part of a multiple building election.
• Connecticut
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• Florida
  • May be used only on 9% projects;
  • Previously awarded projects electing the AI set-aside must provide an updated market study;
  • All BINs must be part of a multiple building election;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.

• Georgia
  • Will not be permitted for 2018 allocations;
  • May be used only on 9% projects;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • No more than four threshold income limits may be used;
  • The designation of each unit must be identified;
  • Must be a reasonable distribution of set-asides across all unit sizes;
  • All BINs must be part of a multiple building election;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits;
  • Lenders and equity providers must provide a statement that they are aware of the AI election; and
  • Property Management company must acknowledge the use of AI.
• Indiana
  • May be used only on 9% projects; and
  • Projects awarded 2018 credits may make the election if 8609s have not be sent to the IRS.
• Maryland
  • May be used only on 9% projects; and
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points.
• Michigan
  • Previously awarded projects electing the AI set-aside must provide an updated market study; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• Minnesota
  • Will not be permitted for 2018 allocations.
• New Jersey
  • Will not be permitted for 2018 allocations.

• North Dakota
  • May be used only on 9% projects;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • Projects awarded 2018 credits may make the election if 8609s have not be sent to the IRS;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • All BINs must be part of a multiple building election;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• Ohio
  • May be used only on 9% projects;
  • If units are designated for 60 to 80% tenants in LIHTC units, at least 50% of rent-restricted units must be affordable to tenants with incomes under the 60% level;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • All BINs must be part of a multiple building election; and
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits.
• Oklahoma
  • May be used only on 9% projects;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • The designation of each unit must be identified;
  • Must be a reasonable distribution of set-asides across all unit sizes;
  • All BINs must be part of a multiple building election;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits; and
  • Property Management company must acknowledge the use of AI.

• Pennsylvania
  • Will not be permitted for 2018 allocations;
  • Only up to 10% of units may be designated for incomes above the 60% AMI;
  • May be used only on 9% projects;
  • Previously awarded projects electing the AI set-aside must provide an updated market study;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • No more than four threshold income limits may be used;
  • Must be a reasonable distribution of set-asides across all unit sizes; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• South Carolina
  • Will not be permitted for 2018 allocations.
• South Dakota
  • May be used only on 9% projects; and
  • While units receiving Housing Trust Funds (HTF) can be included for purposes of AI, they will not receive points as Deep-Income Target Scoring on an application.
• Texas
  • May be used only on 9% projects;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • Previously awarded projects electing the AI set-aside must provide an updated market study;
  • The designation of each unit must be identified; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• Utah
  • May be used only on 9% projects; and
  • Must be a reasonable distribution of set-asides across all unit sizes.

• Virginia (QAP Proposals Only)
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects);
  • All BINs must be part of a multiple building election;
  • The designation of each unit must be identified;
  • Owners electing the AI set-aside will have to waive the Qualified Contract option;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits;
  • Units will be required to float;
  • Must be a reasonable distribution of set-asides across all unit sizes; and
  • Use of project-based rental assistance will be limited for the deeper set-aside units.
• Washington
  • May be used only on 9% projects;
  • Previously awarded projects may use AI if 8609s have not been issued and it would not have changed awarded points;
  • Previously awarded projects electing the AI set-aside must provide an updated market study;
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits; and
  • Lenders and equity providers must provide a statement that they are aware of the AI election.
• Wisconsin
  • AI may only be used on 4% credit deals;
  • All units in the project must be rent-restricted (i.e., no mixed-income projects); and
  • Extended Use Agreement will not be changed if AI is selected for second allocation of credits.

Owners and managers should keep in mind that these policies are fluid and certainly subject to change. Anyone considering electing the Average Income Minimum Set-Aside should carefully review their HFAs QAP and associated regulations prior to making the election.   Back to news