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December 11, 2018

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NJ HMFA Seeks Comments on Proposed Amendments to Low Income Housing Tax Credits Qualified Action Plan

For years the Low Income Housing Tax Credit Program has been successful in catalyzing private investment into underserved communities to develop affordable housing options for citizens.  In short, the program is a 10-year tax incentive aimed at encouraging development of affordable residential rental housing.  The tax incentive is received by a developer after its application is approved, and thereafter the tax credits are typically syndicated to a third-party investor (thus generating liquid value for the developer).  The New Jersey Housing and Mortgage Finance Agency (“HMFA”) has been particularly adept at managing this federal program, generating a significant demand for the Low Income Housing Tax Credits (“LIHTC”).  In fact, the HMFA estimates that demand for LIHTC’s exceeds supply almost three-to-one.

The HMFA, as administrator of the LIHTC program for the State of New Jersey, recently proposed amendments, repeals and new rules to the Low Income Housing Tax Credit Qualified Action Plan (“QAP”), codified at N.J.A.C. 5:80-33.1 et seq.  If ultimately adopted, the amendments will affect developers utilizing the program in a number of ways, certain of which are summarized below.  The proposed amendments, repeals and new rules will be discussed during a public hearing held at the HMFA on Tuesday, December 11, 2018, at 10:00 a.m.  The HMFA will also accept written comments until January 18, 2019.  For full text of the proposed amendments, please see:

https://www.njhousing.gov/dca/hmfa/media/download/regulations/tc_qap_proposal_notice_2018_11_13.pdf

Fortunately for developers familiar with the program, the LIHTC program remains largely intact, however the proposed amendments would change certain eligibility criteria and application requirements.  Additionally, the amendments would alter the existing set-asides present in the program.  The new rules also provide additional criteria for evaluation of an application, as well as clarity regarding the point system used to assess applications.  The following represents a brief summary of the most material changes present in the proposed amendments.  Giordano, Halleran & Ciesla, P.C. is actively monitoring comments received by the HMFA and will provide updates once any amendment is finalized.  In the meantime, Michael Bruno, Brian Shemesh and Kyle Campanile can be contacted for any questions related to Low Income Housing Tax Credits or other redevelopment issues.

Summary of Material Amendments to Low Income Housing Tax Credit Qualified Action Plan

  • Family Cycle Changes

    • Reserved credits, or “Set-Asides”, are no longer available to HOPE VI / Choice Neighborhoods. Instead, the first set-aside of reserved credits is for a project that contains up to 55 percent affordable units and is located outside of a Targeted Urban Municipality.  Preservation set-asides remain available.

      • Targeted Urban Municipality (“TUM”) is a new concept, and the HMFA will provide a list of TUMs annually.

    • HMFA will accept only one application per developer/general partner/ managing member per municipality in the Family Cycle.

  • Senior Cycle Changes

    • Reserved credits, or “Set-Asides”, are no longer available to HOPE VI / Choice Neighborhoods. Instead, the set-aside of reserved credits from the Senior Cycle is for preservation project.

    • HMFA will accept only one application per developer/general partner/ managing member per municipality in the Senior Cycle.

  • Supportive Housing Cycle Changes

  • HMFA will accept only one application per developer/general partner/ managing member per municipality in the Supportive Housing Cycle.

  • Changes applicable to Family Cycle, Senior Cycle, Supportive Housing Cycle and Final Cycle

    • Maximum Total Development Costs have been increased as follows: $275,000 per unit for buildings 1-4 residential stories; $300,000 per unit for buildings with 5-6 residential stories; and $325,000 per unit for buildings with over 6 residential stories.

  • Soft Costs shall not exceed 30% of total development costs.

  • Changes to Application Process

  • Application Fee Increased Nominally

  • Developer’s now required to satisfy Energy Benchmarking requirements.

  •  

  • Point System Changes

    • Additional clarity regarding point system provided for various criteria present in old point system for each cycle.

      • Additional criteria for point increase / reduction included.

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About this Author

Michael A. Bruno, Giordano Law Firm, Real Estate Attorney
Shareholder

Mr. Bruno, shareholder in Giordano, Halleran & Ciesla's Real Estate, Land Use & Development practice area, focuses his practice area on real estate transactions and approvals with an emphasis on redevelopment, planned residential development, affordable housing, and mixed use development. Mr. Bruno represents and counsels companies and developers in every phase of real estate acquisitions, financing and development including redevelopment agreements and long and short term financial agreements and other state, regional and local agency financing programs available in connection...

732-741-3900
Marc D. Policastro, Giordano Law Firm, Business Attorney
Shareholder

Mr. Policastro is a transactional, business attorney, who focuses his practice in development, redevelopment, environmental compliance cases, corporate transactional matters, land use, zoning and business counseling. Admitted to practice in New Jersey and New York, he has represented numerous national developers, manufacturers, cogeneration facilities and utilities, automobile dealerships, lenders, borrowers and municipal boards in myriad land use contexts, including commercial and residential development and due diligence matters. He also focuses on complex remediation cases and general environmental compliance counseling. He has significant experience in ISRA, Spill Act, LSRP, UST and related hazardous substance regulatory matters and redevelopment of contaminated sites. Mr. Policastro is originally from New York City and was raised in Holmdel, NJ. Mr. Policastro attended Christian Brothers Academy, University of Richmond and Seton Hall Law School. He now resides with his two children in Little Silver, NJ.

732-741-3900
Donna A. McBarron, Giordano Halleran Law firm, real estate lawyer, redevelopment attorney

Donna A. McBarron is of-counsel to the Real Estate, Redevelopment and Planned Real Estate Department and the Leasing Department. Ms. McBarron has over 15 years of experience dealing with complex commercial real estate matters, negotiating commercial leases, and has represented multiple municipalities in connection with their affordable housing litigation and compliance. Ms. McBarron received her BA from Rutgers University and her JD from Rutgers University School of Law.

732-741-3900
Associate

Mr. Shemesh, an Associate in the firm's Real Estate, Redevelopment and Planned Real Estate Development Practice Area, focuses his practice on all land-related matters, including redevelopment projects, commercial real estate transactions, and landlord-tenant disputes.

Prior to joining the firm, Mr. Shemesh worked as an associate in the corporate group of a global law firm, assisting with corporate matters including, but not limited to, mergers and acquisitions, equity financings, corporate governance, private equity transactions, and capital...

732-741-3900
Associate

Kyle Campanile is an Associate in the firm's Real Estate, Redevelopment and Planned Real Estate Development Practice Area. Mr. Campanile focuses his practice on commercial real estate and land use matters, with emphasis on development, redevelopment and facilitating transactions. Mr. Campanile has experience preparing and reviewing applications for site plans, use and bulk variances, and long-term tax abatements. Additionally, Mr. Campanile has negotiated and prepared agreements concerning financings, leasings, acquisitions and sales.

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732-741-3900