Mixed income housing is far from a new phenomenon, especially in New York City where rent regulation has long established low and middle-income tenants living side-by-side free market tenants.
However, many developers in New York City are now taking advantage of the variety of tax abatement and exemption programs, and low-interest or no-interest financing programs that New York City’s regulatory agencies have to offer to encourage the development and preservation of such forms of housing.
Yet given the ever-changing regulatory environment and the numerous requirements of many of these programs, compliance can often prove to be difficult and overwhelming. Good legal counsel and guidance is important for successfully taking advantage of such programs.
One such program is the 80/20 Program, which provides developers with tax-exempt bond financing in exchange for a new or rehabilitated development setting aside at least 20% of the units for low-income tenants.
The tax-exempt bond financing generates 4% “as of right” Low Income Housing Tax Credits (“LIHTC”), which can be syndicated to generate part of the required equity a borrower must contribute to the financing or be utilized to offset the borrower’s tax payments.
LIHTC can also be obtained automatically through the Low-Income Marketplace Program (LAMP), established by the Housing Development Corporation in 2003. Under this initiative, all tax credit eligible units in the housing development must be available to residents earning 60% of the New York City Area Median Income (“AMI”) or less. In addition, 20% of the units must be reserved for households earning at or below 40% AMI or for homeless households.
A developer can also receive LIHTC for mixed income housing through the New York City Department of Housing, Preservation and Development (“HPD”) where 40% of the units in a development are reserved for households earning at or below 60% of the AMI.
After approval is obtained, all projects are then governed by a Regulatory Agreement. The Regulatory Agreement articulates project specific requirements in addition to income restrictions, including, but not limited to: low income housing tax credit requirements; tenant certification requirements; lease up procedures and benchmarks; restrictions on transfers; inspections; and financial reporting requirements.
As part of these requirements, developers receiving LIHTC must keep records of low-income tenant’s annual income certifications and recertifications, which must be made available to the appropriate agency upon request for LIHTC compliance monitoring.
Low-income tenants are required to submit annually a certification of Annual Income and Household size to verify such tenant’s annual income. Low-income tenants can be denied a renewal lease or have their tenancy terminated for making a false or fraudulent certification with respect to Annual Income or Household size. Additionally, a low-income tenant’s tenancy may be terminated for failure to recertify their income.
Thus, although compliance can be demanding, a developer may stand to benefit greatly through the financial benefits these programs are able to provide.
Alana Wrublin (firstname.lastname@example.org) is an associate in the Firm’s Administrative Law and Transactional Departments.