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Novogradac LIHTC Working Group Comments on NCSHA’s Recommended Practices

Published by Mark Shelburne on Thursday, September 22, 2022 - 12:00AM

The National Council of State Housing Agencies (NCSHA) is updating its Recommended Practices for Housing Credit Administration (Practices). A step in the process was seeking input from certain interested parties in addition to NCSHA low-income housing tax credit (LIHTC) allocating agency members. NCSHA included Novogradac’s LIHTC Working Group among those invited to comment.

History and Overview

The first Practices date back to shortly after Congress enacted the LIHTC in 1986. NCSHA and its members wanted to strengthen the credits’ administration and believed adoption of national standards would reduce the possibility of increasing federal mandates. The most recent change was a comprehensive revision and expansion in 2017.

Together the Practices represent a collective agreement among agencies on the best ways to allocate LIHTCs, underwrite applications, manage a portfolio and ensure compliance with federal requirements.

Although not binding, agencies carefully consider the extent to which their qualified allocation plans (QAPs) follow the Practices. Another way the Practices are used is by those submitting comments to an agency on its policies, specifically to note how policies do not align with Practices.

Current Update

NCSHA created a task force of 22 agency executive directors to lead the update. The plan is to have work completed by June 2023. While all subject matter topics are open for reconsideration, the primary focus areas are:

  • responding to higher development and operating costs;
  • preserving affordability and protecting low-income renters;
  • expanding opportunity for renters and industry participants of color; and
  • optimizing the siting of new LIHTC developments.

NCHSA invited input via a survey with 10 specific and open-ended questions:

  1. Do any of the current recommended practices relating to this issue … need revision in light of the current volatility in development and operating costs?
  2. What, if any, new recommended practices should state allocating agencies consider to respond to current volatility in development and operating costs?
  3. Do any of the current recommended practices relating to this issue … need revision in light of current preservation challenges?
  4. What, if any, new recommended practices should state allocating agencies consider to respond to current preservation challenges, including the premature ending of affordability restrictions by qualified contract, challenge to the right of first refusal provision or the end of the statutory affordability period at Year 30?
  5. Do any of the current recommended practices relating to this issue… need revision in light of enhanced focus on the need for more equitable development and management?
  6. What, if any, new recommended practices should state allocating agencies consider to expand opportunity for renters and industry participants of color?
  7. Do any of the current recommended practices relating to this issue … need revision in light of current housing market dynamics?
  8. What, if any, new recommended practices should state allocating agencies consider to optimize siting of new Housing Credit developments?
  9. In addition to the four major issues outlined above, are there other existing recommended practices that you suggest need revision? If yes, please specify what revisions are needed and why.
  10. Are there other aspects of state Housing Credit administration that would benefit from new recommended practices? If yes, please specify what new practices are needed and why.

LIHTC Working Group Submission

Novogradac drafted responses to the questions above, more than 1,400 words. The content came from both Novogradac’s professional experience and working group members’ perspectives. Below is a summary of the answers; the letter in its entirety is available here.

  • The Practices for development costs should be separated into rehabilitation and new construction. The latter should not use an all-in cost-per-unit standard or encourage a race to the bottom.
  • Developer fees for tax-exempt bond properties can be higher than those for 9% LIHTCs because the development process is more involved.
  • Agencies should process complete cost certifications in a timely manner and not make excessive requests.
  • The current practice of using cycle-specific solutions to help with cost overruns is inefficient and causes problematic uncertainties. Instead, agencies should adopt standing policies.
  • Creating different set-asides for rehabilitation and new construction applications allows for applying better selection criteria for each.
  • Agencies have valid reasons to reward assistance from cities and counties more than those from other sources.
  • The LIHTC is more difficult and riskier than in years past, so the Practice relating to development experience should not made less demanding.
  • Developers should be able to determine where to look for potential sites without third-party assistance.
  • Agencies should regularly work with owners and interest groups on continually making improvements to compliance and asset management policies.
  • Too many QAPs are unnecessarily lengthy and difficult to comprehend, which creates problems for everyone.
  • Agencies should carefully consider what goes into recorded extended-use agreements.
  • Novogradac’s Rent & Income Calculator is better than agencies’ posting limits.

Conclusion

NCSHA is to be commended for continually updating and improving the Practices, as well as actively seeking input from interested parties.

Being a member of Novogradac’s LIHTC Working Group allows for opportunities to contribute to these sorts of consequential policymaking processes. Check this page of our website for more information on how to join.

 

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