Low Income Housing Tax Credits & Preservation in Massachusetts, 2018

The 2018 Massachusetts Qualified Action Plan (QAP) prioritizes projects with low income residents, preservation developments, and projects in need of community revitalization. The QAP lists specific thresholds projects are required to adhere to, as well as particular factors that qualify for basis boosts and point incentives.


Preservation set-aside: 30% of the available credit will go towards the preservation of existing housing. Sponsors should evaluate proposed preservation projects in accordance with the subsections below:

·      The housing is at risk of loss due to market conversion. Typically, projects qualifying under this subsection will be existing affordable housing projects whose owners are able either to opt out of the Section 8 subsidy contract or prepay the existing mortgage financed through HUD, MassHousing or Rural Development. In addition, some projects are reaching the end of their 30 or 40 year governmentally financed mortgages, or governmental use restrictions. If these projects are converted to market, the units will continue to exist, but will be lost from the Commonwealth’s inventory of affordable housing. In some cases, this will result in the displacement of existing residents through steep rent increases. Many of these projects are too valuable to lose. The replacement costs would far outweigh the cost to the state of preserving the existing stock. In general, projects will not be considered for funding under this set-aside unless they can be converted to market within 36 months. Rare exceptions may be made for particularly valuable projects in the strongest market areas.

·      The housing is at risk of loss due to physical condition or financial distress. A project in poor physical condition may be at risk of condemnation or other governmental action to close the property. A property in financial distress has experienced serious cash flow problems that will likely lead to foreclosure. DHCD will evaluate an application to preserve a project in poor physical condition based on a capital needs assessment included in the OneStop+ submission. The assessment must describe how all the major capital needs of the project will be addressed. Applications to assist projects in financial difficulty must demonstrate that the financing, property management, and asset management plans will be sufficient to ensure the project’s ongoing financial stability. In general, projects will not qualify for funding under this set-aside unless the capital needs assessment indicates a minimum rehabilitation expenditure of $30,000 per housing unit.

·      The application represents a time-limited opportunity to purchase existing affordable housing. In some cases, a preservation sponsor may have the opportunity to purchase a property due to a seller’s need or desire to sell at a particular time. A purchase under Chapter 40T would also qualify under this subsection. While they may represent desirable transactions, projects qualifying as preservation projects under this subsection generally will rank lower than projects qualifying pursuant to subsections a and b above, and only rarely will qualify for competitively allocated 9% tax credits or for 4% credits with DHCD subsidy.

m    Conformance with set-aside categories: Within the preservation set-aside, the minimum project size will be twelve units, although the Department expects that most or all applications in this category will represent fairly large-scale projects. At least 65% of the units in a proposed production project must have two or more bedrooms, and at least 10% of the units must have three bedrooms. DHCD will permit exceptions on the number of bedrooms only if efficiency or one-bedroom units are appropriate for the intended residents.

       The Department recognizes that certain preservation transactions are too large to fit within the normal funding limits yet represent projects of scale well worth preserving. From time to time, if resources are available, DHCD is prepared to accept very large-scale preservation applications on a rolling basis. Such applications typically must represent projects that will include more than 500 units.


Year 15 Extended Use:

All applications must commit to a thirty-year term of affordability (45 years if applying for Massachusetts State Low Income Housing Tax Credits). With respect to affordability, the sponsor/owner must commit to maintain the tax credit project as low income rental housing for at least 30 years (45 years if applying for Massachusetts State Low Income Housing Tax Credits)

Year 15: Qualified Contracts

To offer to the state an opportunity to present a “qualified contract” for the purchase of the project after expiration of the term of the Agreement. According to the Tax Credit Regulatory Agreement, the owner will be required to submit to the DHCD a written request one year before expiration of the term of the Agreement for DHCD to procure such a qualified contract.

DHCD will award three points to applications whose sponsors commit to a term of affordability of 50 or more years.

Contributed By: 
National Housing Trust

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