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Presentation, discussion, and possible action regarding a Material Amendment to the Housing Tax Credit Application for Waterview Apartments (HTC #21414)
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RECOMMENDED ACTION
recommendation
WHEREAS, Waterview Apartments (the Development) received a 4% Housing Tax Credit (HTC) award in 2021 for the new construction of 300 units in Anna, Collin County;
WHEREAS, Anna Crossing Partners LP (the Development Owner or Owner) requests approval to change the Qualified Low Income Housing Development Election from Average Income to the set-aside requirement that specifies that at least 40% or more of the residential units must be both rent restricted and occupied by individuals whose income is 60% or less of the median gross income (i.e., 40% at 60% minimum set-aside election);
WHEREAS, Average Income has an administrative burden and risk of noncompliance with varying income levels, and lenders and syndicators have become increasingly unable to accept income averaging;
WHEREAS, with a change to the 40% at 60% set-aside and all of the units at 60% Area Median Income (AMI) to replace income averaging, the Owner was able to close with the lender and syndicator despite less favorable pricing terms;
WHEREAS, Board approval is required for a request to implement a revised election under §42(g) of the Code prior to filing of IRS Form(s) 8609 as directed by 10 TAC §10.405(a)(4)(G), and the Applicant has complied with the amendment requirements under 10 TAC §10.405(a); and
WHEREAS, the requested change does not negatively affect the Development, impact the viability of the transaction, impact the scoring of the Application, or impact the HTC award;
NOW, therefore, it is hereby
RESOLVED, that the requested material application amendment for Waterview Apartments is approved as presented at 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
Waterview Apartments (HTC #21414) was approved for a 4% HTC award in 2021 for the new construction of 300 units of general multifamily housing in Anna, Collin County. Construction of the Development is currently in progress. The Owner originally elected Average Income as the Qualified Low Income Housing Development Election, with an average income under 60%, which would allow the property to serve households with incomes ranging from 20% to 80% of the Area Median Income (AMI).
In a letter dated September 20, 2024, John Hickman, the representative for the Owner, requested approval for a material amendment to the Application to revise the Qualified Low Income Housing Development Election from Average Income to the set-aside requirement that specifies at least 40% or more of the residential units must be both rent restricted and occupied by individuals whose income is 60% or less of the median gross income (i.e., 40% at 60% minimum set-aside election). With this change, the Development would have all units restricted as 60% AMI units. The average income for the low-income units would remain at 60%.
The Owner states that since initial application in 2021, the financial feasibility for the Development has changed. At application, the tax credit equity pricing was $0.90 and the debt financing at an interest rate of 3.75%. However, at the time of closing, the tax credit pricing had fallen to $0.83, and the interest rate had risen to 4.04%. It was not foreseeable that the market would change as quickly as it did. Additionally, lenders and syndicators have become increasingly unable to accept income averaging due to the administrative burden and risk of noncompliance. Income averaging poses difficulties in maintaining compliance with the varying income levels, which increases the risk of errors during compliance monitoring process. The Owner closed with the lender and syndicator despite the less than favorable pricing terms by assuming a set-aside of 100% of the units at 60% AMI instead of the Average Income election. The Owner did not realize the requirement for a material application amendment until the Land Use Restriction for the Development was drafted by the Department reflecting the Average Income restriction.
The requested amendment to the Application does not materially alter the Development, nor does it have a negative financial impact on the Development because the average income remains at 60% of AMI with minimal impact to the potential gross income. The Owner has provided documentation from the lender and the investor acknowledging the requested change.
Staff recommends approval of the material amendment request.