title
Presentation, discussion, and possible action on a request for return and reallocation of tax credits under 10 TAC §11.6(5) related to Credit Returns Resulting from Force Majeure Events for three Buena Vida Developments
end
RECOMMENDED ACTION
recommendation
WHEREAS, Buena Vida Supportive Housing (24196), Buena Vida Senior Living (24197), and Buena Vida Apartments (24198) (collectively referred to as the Buena Vida Redevelopment) are three projects that were awarded 9% housing tax credits during the 2024 Competitive Housing Tax Credit cycle;
WHEREAS, the Development Owners executed a Carryover Allocation Agreement that included certifications stating each building receiving an allocation would be placed in service by December 31, 2026;
WHEREAS, the Development Owners have requested an extension to the placement in service deadline under 10 TAC §11.6(5), related to Credit Returns Resulting from Force Majeure Events;
WHEREAS, the Department lacks authority to extend federal placement in service deadlines and may only reset such deadlines by requiring the credits to be returned and immediately reallocated to the Development, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owners have submitted documentation demonstrating that a qualifying force majeure event has occurred;
NOW, therefore, it is hereby
RESOLVED, that the request to treat the matter under the force majeure provisions of 10 TAC §11.6(5) is approved, and that the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar shall be applicable to the Developments.
end
BACKGROUND
|
Development |
Buena Vida Supportive Housing |
|
Target Population |
Supportive Housing |
|
HTC Award |
$1,648,986 |
|
City |
Brownsville |
|
Total Units |
50 |
|
HTC Units |
50 |
|
Initial Year of Award |
2024 |
|
Extension Requested |
Six months |
|
Development |
Buena Vida Apartments |
|
Target Population |
General |
|
HTC Award |
$2,000,000 |
|
City |
Brownsville |
|
Total Units |
80 |
|
HTC Units |
80 |
|
Initial Year of Award |
2024 |
|
Extension Requested |
Six months |
|
Development |
Buena Vida Senior Living |
|
Target Population |
Elderly |
|
HTC Award |
$2,000,000 |
|
City |
Brownsville |
|
Total Units |
82 |
|
HTC Units |
82 |
|
Initial Year of Award |
2024 |
|
Extension Requested |
Six months |
The Buena Vida Redevelopment is a group of three projects that were awarded 9% housing tax credits during the 2024 round. The projects are three distinct Applications and Developments for the Department’s purposes, but are related in the sense that they share similar principals and financing, and are part of the same overall redevelopment strategy. Each Development Owner executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
In 2024, Buena Vida Supportive Housing (Application #24196), along with its companion projects Buena Vida Family Apartments and Buena Vida Senior Living, received 9% Housing Tax Credit awards. All three developments are part of a phased redevelopment in Brownsville utilizing HUD’s Restore - Rebuild program, formerly known as Faircloth to RAD. This rarely used HUD program has contributed to prolonged pre-closing timelines. The following issues have significantly delayed the projects:
• Extended HUD reviews due to underwriter unfamiliarity with the program and reduced HUD staffing caused by retirements and voluntary separations;
• Delayed Fair Housing and Equal Opportunity (FHEO) approvals regarding site and neighborhood standards, with final clearance not received until February 2025;
• Delayed approval of the HUD Part 58 Environmental Review, which was not received until March 24, 2025, and is required prior to demolition;
• Pending approvals for the HUD Mixed Finance Development Proposal and Evidentiary Documents, expected within two weeks of the request.
Building permits are ready to issue, pending plat recordation. Demolition is scheduled to begin June 9, 2025, and new construction is expected to start July 14, 2025. To expedite schedules and decrease the construction timeline, the Brownsville Housing Opportunity Corporation’s (BHOC) board has authorized $900,000 in pre-closing funding to allow the demolition to occur prior to Closing.
The 18-month construction timeline pushes completion into January 2027, beyond the original placed in service deadline of December 31, 2026. The Applicant is requesting a six-month extension to June 30, 2027, under the QAP’s force majeure provision. The Applicant asserts that the delays were unforeseeable and outside their control.
APPLICABLE RULE
Under 10 TAC §11.6(5), a Development Owner may return credits and receive a reallocation outside the standard allocation process if the return is the result of a qualifying force majeure event occurring prior to issuance of IRS Form(s) 8609. Pursuant to 10 TAC §11.6(5), the Department’s Governing Board may approve execution of a Carryover Allocation Agreement for the current program year with the Development Owner that returned the credits, but only if the following conditions are met:
(A) The credits were returned as a result of "Force Majeure" events that occurred before issuance of Forms 8609. Force Majeure events are the following sudden and unforeseen circumstances outside the control of the Development Owner: acts of God such as fire, tornado, flooding, significant and unusual rainfall or subfreezing temperatures, or loss of access to necessary water or utilities as a direct result of significant weather events; explosion; vandalism; orders or acts of military authority; unrelated party litigation; changes in law, rules, or regulations; national emergency or insurrection; riot; acts of terrorism; supplier failures; or materials or labor shortages. If a Force Majeure event is also a presidentially declared disaster, the Department may treat the matter under the applicable federal provisions. Force Majeure events must make construction activity impossible or materially impede its progress.
Staff has reviewed the request and determined that the delays caused by the complex financing and related, extensive federal reviews meet the criteria of a force majeure event under the rule.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar applicable to the Development
• A new Carryover Allocation Agreement will be executed.
• The new 10% Test deadline will be July 1, 2025.
• The new placed in service deadline will be June 30, 2027.
If the Board denies the request:
• The original placed in service deadline of December 31, 2026, remains in place.
• The Development Owner may either meet the existing deadline, return the credits, or have the award terminated for failing to meet the deadline.
• Returned credits will first be reallocated within the original subregion in accordance with 10 TAC §11.6(2). If no pending applications are eligible within the subregion, the credits will be added to the statewide collapse for reallocation.
This request does not change any deadline for any funding source other than the Low Income Housing Tax Credit program.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for the Buena Vida Redevelopment projects under the force majeure provisions of 10 TAC §11.6(5).