Low Income Housing Tax Credits & Preservation in Michigan, 2013-14

Michigan State Housing Development Authority’s 2013-2014 Qualified Allocation Plan (QAP) targets 25% of the state’s competitive 9% Low Income Housing Tax Credit allocation to preservation proposals and includes points preservation properties.

Eligible preservation projects include those with financing from HUD, USDA RD, or MSHDA, have other below-market financing or are Year15 LIHTCs. Projects must either be within 5 years of permitted prepayment of equivalent loss of low income use restrictions or preserve occupied and restricted low income units provided the rehabilitation will repair or replace components that are either in immediate need of repair/replacement or are substantially functionally obsolete.

One of MSDHA’s four statutory set-asides is 30% for Eligible Distressed Areas, defined as housing projects in eligible distressed areas, which include proposed or existing housing projects in distressed areas pursuant to MCL 125.1411(u). Eligible Distressed Areas are those cities, villages and townships which exhibit higher than statewide average levels of economic distress. A list of Eligible Distressed Areas can be found on MSHDA’s website at: http://www.michigan.gov/mshda/0,1607,7-141--181277--,00.html

Preservation Points:

• 5 points for preserving existing project-based tenant subsidies for the length of the existing rental subsidy compliance period and commit to renew the contract to the extent available.

• 5 points if project requires rehabilitation in excess of $30,000 per unit of hard rehabilitation costs as supported by a Capital Needs Assessment satisfactory to MSHDA.

• 8 points if project involves the rehabilitation of an existing HUD 236 property.

• 3 points if project involves the rehabilitation of an existing HUD 236 property or 5 points if project involves the rehabilitation of an existing HUD 236 property and has received a commitment from a PHA to commit Project Based Vouchers to 50% or more of the units.

Year 15 & Extended Use requirements/incentives:

Existing tax credit properties are eligible for funding in Michigan State Housing Development Authority’s 2013-2014 QAP from the preservation set-aside. Additionally, all Applicants waive the right to request a qualified contract under Section 42(h)(6)(E)(i) of the Internal Revenue Code. Thus, MSHDA's required extended use commitment shall not terminate at the end of the compliance period, but is instead a minimum of 30 years. Projects that agree to commit to an extended use period longer than 15 years (i.e., beyond the minimum total commitment of 15 years compliance plus 15 years extended use = 30 years) will receive 0.34 points for each additional year, up to a maximum of 5 points. Fractional points will be rounded down. Thus, a project committing to a total affordability period of 45 years would earn the maximum 5 points.

Contributed By: 
National Housing Trust

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