title
Presentation, discussion, and possible action regarding a Material Amendment of the Housing Tax Credit Application of HTC #23013 The Laurel at Blackhawk.
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RECOMMENDED ACTION
recommendation
WHEREAS, in 2023 the Board awarded 9% housing tax credits for the new construction of The Laurel at Blackhawk (the Development), an Elderly Development in Houston, Harris County, as a single, three-story, elevator-served building containing 120 units on a 5.46 acre site;
WHEREAS, substantial increases in the cost of insurance, construction loan interest and permanent loan interest have made the Development financially infeasible as originally proposed, the applicant proposes to reduce costs by downsizing the Development from 120 units to 105 units by eliminating 15 market rate units while leaving in place all 89 of the originally proposed tax credit units and 16 of the original 31 market rate units;
WHEREAS, the downsizing will reduce the Development’s Net Rentable Area by 12.1%, from 94,804 square feet to 83,291 square feet, Common Area will decline by 7.1%, from 32,292 square feet to 30,016 square feet, and residential density will decrease by 12.7%, from 22.0 units per acre to 19.2 units per acre;
WHEREAS, the proposed changes do not affect the number, unit mix, square footage or rent restrictions of the tax credit units, the changes reduce the original 17 one-bedroom and 14 two-bedroom market rate units to 8 units each;
WHEREAS, the Common Areas of the Development are reduced in size by eliminating 11% of the breezeway and stair areas, 5% of the maintenance area and 3% of the amenity center, the grille house areas increase in size by 16% and a 317 square foot amenity porch and 354 square foot delivery parcel area are added to the Development;
WHEREAS, the effects of the changes are presented to the Board for evaluation under §2306.6712(d), particularly with respect to any negative effects from
• a modification of the number of units or bedroom mix of units;
• a reduction of three percent or more in the square footage of the units or common areas;
• a modification of the residential density of the development of at least five percent; and
• any other modification considered significant by the board;
NOW, therefore, it is hereby
RESOLVED, that the requested Material Amendment of the Application for The Laurel at Blackhawk 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 Laurel at Blackhawk in Houston, Harris County, received a 9% HTC award in 2023 for the new construction of 120 multifamily units for elderly tenants in one three-story, elevator served building on a 5.76 acre site, with 120 units restricted to rents for tenants within the 30% to 60% range of Area Median Gross Income and 31 market rate units. On September 20, 2023, the Owner submitted a request for approval of a Material Amendment of the Application that reduced the number of units from 120 to 105 thereby increasing the cost per unit by 21.8% from $194,206 to $236,510.
In its treatment of amendments of the application, Tex. Gov’t Code §2306.6712 specifies six changes as material alterations and includes “any other modification considered significant by the Board” as a seventh material alteration. The following bullets discuss the alterations that the statute specifies as material alterations as such material alterations relate to the currently proposed amendment.
• There is not a significant modification of the site plan [§2306.6712(d)(1)]. The layout and building footprint of the site do not change substantially. The changes do not violate the Rules and would not have affected the scoring of the application or the recommendation for an award.
• There is a modification of the number of units and bedroom mix of units [§2306.6712(d)(2)], but the changes do not affect the tax credit units. The total number of income and rent restricted units remains at 53-1BR/1bath units + 36-2BR/2bath units = 89 units. The numbers of units restricted to 30%, 50% and 60% incomes and rents in the amendment are the same as in the Application. The number of market rate units decreases from 17-1BR/1bath units to 8-1BR/1bath units and from 14-2BR/2bath units to 8-2BR/2bath units.
• There is a reduction of more than three percent in the square footage of the units and Common Area [§2306.6712(d)(4)]. The NRA as originally proposed in the application was 94,804 square feet. As amended the NRA is 83,291 square feet. The decrease in NRA is 12.1%. The Common Area [§11.1(d)(22)] as amended, 30,016 square feet, is approximately 7.1% less than the original Common Area, 32,292 square feet. As stated in the amendment request, the decrease in Common Area is entirely due to changes in the areas of corridors and stairs. Amenity related Common Area reportedly increased by 562 square feet.
• There is not a significant modification of the architectural design [§2306.6712(d)(5)] in that the Development remains a single rectangular three-story building ringed by a parking lot and enclosing a landscaped space. The amended building plan does not violate the Rules and would not have affected the scoring of the application or the recommendation for an award.
• There is a modification of the residential density of the development of at least five percent [§2306.6712(d)(6)]. The residential density decreases by 12.7% from 22.0 units per acre to 19.2 units per acre.
• Regarding any other modification considered significant by the Board [§2306.6712(d)(7)], there is an decrease in the total construction contract of $1,990,806, from $17,207,229 at application to $15,216,423 as amended. Total development cost decreased by $1,840,350, from $26,673,923 at application to $24,833,573 as amended. The tax credits requested remain the same in the amendment as at application, $2,000,000. As reported in the amendment request, a 71% increase in insurance expense, an increase of approximately 1% in the interest rate of the construction loan, and an increase of approximately 0.65% in the interest rate of the permanent debt financing resulted in total lost proceeds from debt financing of approximately $1,596,000.
• Department staff are instructed by §2306.6712(e) to “consider whether the need for modification proposed in the amendment was . . . reasonably foreseeable by the applicant at the time the application was submitted” [§2306.6712(e)(1)] or “preventable by the applicant” [§2306.6712(e)(1)]. As reflected by staff’s analysis of the application prior to the award of tax credits, it is staff’s opinion that the current need for modification was neither foreseeable nor preventable.
In staff’s judgement, the unforeseeable and unpreventable circumstances that created the need for the changes proposed in this amendment request support a recommendation for approval. The Development Owner has complied with the amendment requirements under 10 TAC §10.405(a).
Staff recommends approval of the amendment request as presented herein.