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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for The Henderson at Reinli (HTC #21429)
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RECOMMENDED ACTION
recommendation
WHEREAS, The Henderson at Reinli (the Development) received a 4% Housing Tax Credit (HTC) award in 2021 for the new construction of 306 units for the general population in Austin, Travis County;
WHEREAS, construction of the Development has been completed, and due to increased development costs, LDG The Henderson on Reinli, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $3,601,141, the amount reflected in the Determination Notice, to $4,331,400, a difference of $730,259, which represents a 20.28% increase;
WHEREAS, §42(m)(2) of the Internal Revenue Code allows an increase of tax credits for a bond financed project when the increase is determined necessary as demonstrated through the submission of the cost certification package;
WHEREAS, 10 TAC §10.401(d) requires approval by the Board if an increase to the amount of tax credits exceeds 120% of the amount of credit reflected in the Determination Notice; and
WHEREAS, a review of the cost certification package submitted by the Development Owner supports the need for the additional tax credits requested, and staff has determined that the increase is necessary for the viability of the transaction;
NOW, therefore, it is hereby
RESOLVED, that the increase to the housing tax credit amount for The Henderson at Reinli requested by the Development Owner is approved as presented to this meeting, and the Executive Director and his designees are each authorized, directed, and empowered to take all necessary action to effectuate the foregoing.
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BACKGROUND
The Henderson at Reinli received a 4% HTC award in 2021 for the construction of 306 units for the general population in Austin, Travis County. On June 1, 2021, a Determination Notice was issued with an approved annual tax credit amount of $3,601,141. The residential buildings in the Development placed in service between July 15, 2025, and October 20, 2025, and the cost certification documentation for the Development is currently under review by the Department.
During the review of the cost certification, Jason Trevino, the representative for the Development Owner, requested an annual tax credit award of $4,331,400, and this tax credit amount represents an increase of $730,259 (20.28%) from the amount reflected in the Determination Notice. The representative for the Development Owner explained that the Development incurred increased costs during construction. A comparison of the development costs from the time of the Application, in 2020, to Cost Certification indicates that total development costs increased approximately $12,630,355 (15.74%), from $80,249,450 to $92,879,805.
The Owner representative indicated that since the time of the initial Application there were increases in construction costs, construction delays, increases in financing costs, and increases in developer fees. Specifically, for construction costs, the Owner representative indicated that direct construction costs were underestimated at the time of Application, as they did not have actual construction bids at that time. Previously unknown site conditions caused additional grading, earthwork, and underground utilities. Additionally, there were several change orders and material price escalations, such as for lumber, which also increased the direct construction costs. Subcontractor price increases were added for flooring, steel, paving, site concrete, and drywall. Also, an upgrade in countertops from laminate to granite also added to the additional costs.
Construction delays resulted in increases in General Conditions and Overhead costs due to a lengthened schedule. Delays were encountered due to miscommunication on connectivity parts with Austin Energy, required redesign of water line plans by the civil engineer, and unexpected delays obtaining Demolition and Traffic Control Permits from the City of Austin. The construction delays resulted in increased financing costs, such as construction interest and financing fees. The developer fees, which is allowed to be up 15% of the project’s eligible costs, also increased as a result of the total cost increases.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $4,331,400, and that the requested increase is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period. This results in a 20.28% increase from $3,601,141, the original annual HTC amount in the Determination Notice.
In accordance with 10 TAC §10.401(d), Board approval is required because the requested tax credit amount exceeds 120% of the HTC amount reflected in the Determination Notice. The Development Owner will be required to submit the Tax-Exempt Bond Credit Increase Request Fee required in 10 TAC §11.901(8) prior to issuance of Forms 8609. Additionally, all required pending documentation for the cost certification review must be provided for the issuance of 8609s.
Staff recommends approval of the increase to the tax credit amount as presented herein.