LIHTC Applications FAQ
This LIHTC Applications FAQ page is the method for submitting questions related to application requirements and scoring criteria for the current competitive low income housing tax credit allocation round. Staff will make a good faith effort to post responses to questions within three business days of receipt. Note that staff may edit questions for clarity before posting them to this page. If you believe that your question was misrepresented and your question was not answered correctly, please submit a follow-up question or clarification of your question. The deadline to submit a question is listed on the calendar for the current round.
Q1: For an acq/rehab, can a 5 percent fee on the acquisition portion be earned in addition to the 14 percent overall developer fee cap?
A1: No, the 14 percent is inclusive of all fees to the developer, including consultant fees and any acquisition fee collected.
Q2: Since insurance and bond costs are included the AIA G703 budget within our general contractor’s construction contract, I assume we should then consider insurance and bond costs to be Construction Costs for purposes of calculating builder profit, overhead and general requirements?
A2: The QAP states that “Construction Costs” includes “construction costs in the construction contract”. This can be read as “hard construction costs” in the construction contract. Insurance costs are not hard costs. Similarly, bond costs may be paid for by the general contractor or the developer, and are not considered hard “construction costs in the construction contract”. Both Insurance and Bond costs are listed as separate line items on schedule A (Under Construction Financing) and, as such, are separated out of Construction Costs for MFA’s assessment of builder fees (as is Gross Receipts Tax, Builder’s Profit, Overhead, and General Requirements).
Q3: Please tell me what the following amounts were for the 2020 9 percent LIHTC application round for:
- The Total Development Cost per Unit for all new construction and Adaptive Reuse Projects submitted in the same round.
- The hard Construction Cost plus architect and engineering fees per square foot for all new construction and Adaptive Reuse Projects submitted in the same round.
A3: The Average Total Development Costs (per unit and per square footage) for New Construction/Adaptive Reuse projects for the 2020 Round applications has been posted to the LIHTC page under 2020. Total Development Costs (and per unit and per square footage amounts) for each specific project can be obtained through an IPRA request, but will not be posted to the website.
Q4: Waiver for Minimum Threshold on Operating Costs – Where and how do we provide evidence that operating expenses have been below MFA minimum thresholds for several years?
A4: If operating expenses are outside our underwriting guidelines, we request submission of a narrative acknowledging that the expenses are outside of the range and giving an explanation as to why. If the project is a rehab, we ask that an existing operating and a proposed operating expense budget be provided. This will allow us to review current expenses against what is proposed.
Q1: If we're developing in phases with land contributed by the municipality, is a government commitment/development agreement okay to take down in phases, or do we need a full PSA for each phase?
A1: As long as the contribution clearly indicates all/both sites/areas, the same contribution can be used for each phase. Just make sure it is updated, if necessary, to meet the age requirement for commitments.
Q2: When exactly the service provider must start providing the committed services to tenants? is it at conversion or at certain percentage of occupancy?
A2: Services must be provided prior to 8609 issuance.
Q3: Is there a way to get nonprofit owner and developers points for the women and minority participation? If a non-profit owner has a board that is mostly minorities, would that count? What about the executive director?
A3: If a nonprofit development partner has a minority/women majority board make up, that too would qualify the project for points within the Other Scoring Points Available category. If a minority/woman executive director sat on the board, they could count towards this goal, but the board is considered the “owner” of the nonprofit, so it is the make up of that entity that we would be focused on. This would have to be documented on the appropriate form in the Application Package.
Q4: With regards to the Non-Smoking Properties scoring category, does non-smoking pertain to medicinal marijuana?
A4: The guidelines for the Smoke Free at Home program can be found on that program’s website: smokefreeathomenm.com, and do not include medical marijuana, however, a variety of federal funding sources prohibit the use of medicinal marijuana on properties. We recommend that projects check with their funding source(s) for more information on what applies to their specific project.
Q5: Are Roswell and Alamogordo considered no "active" LIHTC project areas?
A5: As of October 2020, neither Roswell nor Alamogordo have “active” LIHTC projects within them. In other words, projects developed in those areas are over 5 years old.
Q6: Do all portions of scattered site projects have to be within 0.5 mile away from NM designated MainStreet area to receive points?
A6: Yes, for scattered site projects, all of the buildings have to meet the criteria in order to be eligible for points, and there are no partial points available.
Q7: Does the entire project have to be certified as National Register of Historic Places? For example, if a new construction project has a National historic building as part of the project will this project qualify for points?
A7: If there is a National Historic Building as part of the project, it will qualify for points (as long as all documentation is provided with the application), regardless of whether there are additional units (rehab or new) involved or not.
Q8: We are considering a new construction project that involves two sites that are about 0.5 mile apart with one of the sites incorporating adaptive reuse. Would the project receive the adaptive reuse points?
A8: An existing FAQ answers part of the first question:
Q: Can you please confirm if the gross square footage amount in the denominator(sum of each buildings gross square feet) includes the gross square footage of the adaptive reuse space (numerator) in the formula for calculating the percentage of the adaptive reuse space? I am assuming it does not.
A: The “sum of each building’s gross square feet” (denominator) would be inclusive of the area that is being adapted. The “building’s gross square feet adapted” would be the amount of the overall gross square feet that will be adapted (numerator). This would give the “percentage of the building’s gross square footage that is being adapted/rehabilitated”.
For example, if there are four buildings a project, and the “sum of each building’s gross square feet” is 10,000, but only one of the buildings is being adapted for reuse and the others are new construction, then only 2,500 of the total gross square feet will be adapted, and therefore only 25 percent of the building’s gross square footage is adapted/rehabilitated.
For scoring under Criteria 21: Adaptive Reuse, at least 20 percent of the “building’s gross square footage” must be adapted.
By the rationale above, if it is a scattered site project, and only one of the buildings were going to be considered adaptive reuse, as long as that building’s square footage is at least 20 percent of the total buildings’ gross square footage, you would qualify for the adaptive reuse points.
Q9: For adaptive reuse what documentation do you need to prove the buildings were not originally constructed for residential use as the building’s architecture appears to be residential but were originally built as a ministry?
A9: If you can show the history of the building as being built to be a ministry, regardless of what it looks like on the outside now, we would be able to consider it adaptive reuse. (This could be photographic, deed, and/or a combination of other types evidence.) If the building was already converted to be residential multifamily living spaces, that would not count as adaptive reuse, as the new LIHTC project would not be the converting factor.
Q10: The QAP defines Rural as any area that is not Urban, but the checklist for the Locational Efficiency Criterion asks for an Area Classification Map. Is a map showing that the project is not within the Urban Areas defined in the Glossary sufficient?
A10: Yes. As long as the project is shown to not be in an Urban area (as defined by the glossary) it will show it is eligible for that sub category of the scoring category.
Q11: A mixed rehab and new construction project has existing one and two bedroom units, and we are looking to add new three-bedroom units. All the new three-bedroom units will have two bathrooms, but the existing two-bedroom units only have one bathroom. Based on the Households with Children Housing Priority category, would we need to add bathrooms to the existing two-bedroom units to satisfy the design requirements?
A11: No, as long as any added unit contributing to the two- or three-bedroom totals includes the two bathrooms as described in the QAP, there would not need to be any modification of the bathroom count of the existing units.
Q12: We are proposing two services that are currently unlisted in the QAP be provided in our new property serving Households with Children:
- On-site semi-annual eligibility screenings and/or application assistance for Medicaid.
- On-site quarterly technology training.
Can these count for one point each?
A12: Yes, the above listed services can each count for one point as additional enrichment services for Households with Children. They must be delivered on-site, at no charge to all residents, and the delivery of services must be documented in conformance with the LIHTC Compliance Manual.
Q13: For the scoring criteria 4, Sustaining Affordability, does an USDA-RD project with rental subsidy which is built pre-1987 and thus eligible to be taken out of the program, qualify under point 2, “eligible for prepayment and termination of the use agreement”? If so, what documentation is required to support this point allocation?
A13: Yes, the above scenario would qualify for 15 points via the second option: "Existing Projects that are currently subsidized and eligible for prepayment and termination of their use agreement.." In order to prove this, we would need a copy of the USDA use agreement showing that it expires and the property can be removed from the program. In addition, we would need evidence that the rental assistance will continue in order to include it in our underwriting.
Q14: What documentation do you require that a property is on the Federal Historic Register to receive points for criterion #16?
A14: There is an online database (https://www.nps.gov/subjects/nationalregister/database-research.htm) of all the places listed on the National Register of Historic Places. If the property is on there, a print out (or screenshot) of its listing on the website would suffice to prove it is included.
Q15: Regarding the "20 year requirement" what evidence do you require for proof if the building is a federal Historic building and it was built over 90 years ago?
A15: If the building is on the National Register of Historic Places, there will be documentation of the submission to the National Register. This is held on within the National Archives. This documentation may be in the form of dated photographs or other evidence of age and history.
Q16: Our tax credit investor has been underwriting on a 60 percent average income for an Urban Area project. We do however need points from the "income level of tenants" category. Am I reading this correctly - if we come in at say 59 percent on average, do we not score any points there?
A16: For any project located in an Urban Area that proposes to use the Average Income election, the Average Income must be 56 percent or lower to receive the minimum 12 points in the Income Level of Tenants scoring category.
Q17: Since the application deadline is 30 days sooner this year will you be allowing item #16h -the non-profit reviewed or audited financial statements to be from 2019 in order to meet scoring criterion #1?
A17: For the Nonprofit Scoring Criterion, we are looking for the most recent audited financials to substantiate net worth/assets.
Q18: Are resumes for enrichment service providers required at time of initial application for a senior project?
A18: No, resumes, while welcome at the initial application stage, are not required. By the Placed-in-Service and 8609 application, resumes are required.
Q19: Is the definition of an adjoining kitchen for a senior project a kitchen area that includes a stove, frig, sink, dishwasher, and cabinets? Can I substitute a microwave for a stove and not provide a dishwasher?
A19: A full kitchen is required for the common space kitchen area, but if there are extenuating circumstances or reasons for a modified kitchen, we will entertain design waiver requests at application.
Q20: What are the minimum qualifications that a qualified instructor must have to provide the gardening enrichment service for a senior project?
A20: There are no minimum qualifications set, however their resume should substantiate experience teaching gardening in some capacity.
Q21: Can covered open-air breezeway, stair and terrace areas be included in the total building gross square footage for Efficient Use of Tax Credits scoring purposes?
A21: Potentially. If the space requires building a deck, then that floor space can be counted as part of the building’s Gross Square Footage. If there is a second level above, then the second level floor space can be counted. So terraces, which are on a second level could be counted. However, if the patio is not formally surfaced, uncovered, not dedicated to a specific unit, and didn’t require additional structural building, that floor space cannot be counted in the Building’s Gross Square Footage calculation. Similarly, breezeways that required some sort of structural construction to be able to stand on would be considered in the Building’s Gross Square Footage, but if it is basically a sidewalk with a cover, that would not count. If there is countable Gross Square Footage above the “sidewalk” the above, second level, square footage can be counted, but not the first level square footage. Exterior stairs can be counted, because there is required structural building.
Q22: For scoring criterion #2 what alternative forms of transportation that are not on tribal land may be acceptable to MFA and what sufficient documentation is to be provided that establishes the alternate form of transportation is acceptable to MFA?
A22: We are unaware of the different types of formal services that may be available throughout the state, but wanted to allow for the potential. We would be willing to consider as public a service that provides low/no cost, on-call organized, reliable transportation so that users, regardless of their residency in the Project, have access to services and employment. The documentation may vary by provider, but would include evidence of the stated objectives.
Q23: Would MFA consider privately provided rental subsidy to 20 percent of all project units for five points? If yes, what documentation would you require and for how long?
A23: No, under the Sustaining Affordability scoring criterion, the points available are not available for private subsidies.
Q24: For scattered site projects that are selecting criterion #10 Households with Children Housing Priority, are applicants required to meet the New Construction and Rehabilitation Site Design and Development 2021 Mandatory Design Standards for each scattered site even if one of the sites contains 1 unit and another contains four units? Specifically, are the site that has a single family house and the site that has four units of new construction both required to have play areas for each age group 0-5/5-12/+12, community space, and a business center?
A24: The design requirements for the Households with Children Housing Priority selection criteria apply to the total unit count of the project, and per the QAP:
For Projects that combine rehabilitation and new construction:
• All newly constructed two and three or more bedroom Units must have two bathrooms, one of which must contain four pieces (bathtub, shower (or bathtub/shower combo), sink, and toilet) and the other must contain at least three pieces (sink, toilet and bathtub or shower)
• Two and three or more bedroom Units must be added until the percentages required for new construction Projects are met for the Project overall.
The entire project must meet the 2021 Mandatory Design Standards. The QAP addresses scattered site projects:
Generally, each site of a scattered-site Project must have a community space adequate for the provision of services and services must be delivered at each site in order for the Project to be eligible for points for Projects in which Units are reserved for Households with Special Housing Needs, Projects Reserved for Senior Housing or Projects in which 25% of all Units are reserved for Households with Children. However, if one of the project sites proposed for rehabilitation does not have adequate community space for the provision of services, services may be provided for residents at another project site so long as the following conditions are met: 1) the project sites are located within a quarter of a mile of each other and connected by an ADA compliant route, 2) the Application demonstrates, to the sole satisfaction of MFA, how the needs of persons with disabilities who do not have access to on-site services will be met and 3) sufficient community space for the provision of services is available for all residents of the Project.
Beyond that, waivers may be requested during the application process for design elements that are required, but not feasible or reasonable given circumstances.
Q1: Are market studies required for those projects that are re-syndicating with a 100 percent occupancy?
A1: Yes, market studies are required for any project submitting an application for tax credits, whether re-syndications or new allocations.
Q2: Is DocuSign allowed due to the current pandemic, in place of blue ink in-person signing?
A2: Unfortunately, for the 2021 applications, we still require original (blue ink) signatures on documents as indicated in the application materials. We are working on DocuSign capabilities for future applications. However, for non-MFA generated documents (e.g. zoning letters, etc.) DocuSigned or scanned signatures are acceptable.
Q3: Can you give the names of some companies that can do the Market Study?
A3: We cannot give names of eligible market study companies, however any firm that is able to meet the requirements for the Market Study, as described in the Market Study Parameters and sign the Professional Certification document would be eligible to produce the Market Study. MFA reserves the right to commission an additional Market Study (at the applicant’s expense) if the one provided with the application does not meet the parameters to our satisfaction.
Q4: Given the travel restrictions in place for New Mexico due to the COVID-19 pandemic, is there still a requirement for the market study to perform a site visit?
A4: No, MFA will waive the requirement for a site visit to be performed (a current requirement within the Market Study Parameters), until it is safe to travel to, and within, the state.
Q5: Item 16k requires: “If 501(c)3; 2015 NM Charitable Organization Registration Statement (Local nonprofits only). To the best of my knowledge, this hasn’t been required in New Mexico for a number of years now. Will you please take a look at this and let me know what, exactly, we should be providing and where we should get it.
A5: Every nonprofit operating in NM has to register with the State. This can be done through https://secure.nmag.gov/coros/. We are looking for proof of this registration status. The “2015” in the checklist item is a typo.
Q6: Given restrictions due to the COVID-19 pandemic, might there be some latitude (a couple of days if needed) on application hard copy being received by MFA by the January 15, 2021 deadline? Electronic copy would still be received by MFA by January 15, 2021.
A6: MFA recognizes the current conditions related to mail and delivery delays, so as long as the hard copy is sent prior to the deadline of January 15, and a receipt is uploaded with the electronic copy showing that it was sent via USPS, FedEx, UPS, or other carrier service ahead of the January 15th deadline and showing a requested delivery date no later than January 15, we will accept the hard copy if it physically arrives late. There will be no leeway for hand deliveries to the MFA office or the electronic submissions, which must be fully uploaded to our file sharing site: https://mfa.internal.housingnm.org/FileTransferHD by 4 p.m. on January 15, 2021, as stated in the QAP.
Q7: If we are doing a combined rehab and new construction project, we know we will have to choose a track (rehab or new construction based on the higher number of units), but for schedule A, should we put all the new construction and rehab costs together?
A7: No, if the project is a combined rehab and new construction project, we would like to see the rehab costs and new construction costs broken out on a single Schedule A, with the total development costs encompassing all costs. A new Excel file with an extra column for this purpose has been added to the application package.
Q8: Will you accept the Intent to Submit submission electronically?
A8: The submission of the Intent to Submit prompts us to set up an electronic file on our File Sharing site for the project. Until we have that system set up, we have no formal way to accept electronic submissions. For that reason, we require the Intent to Submit to be submitted as a hard copy to MFA.
Q9: The evidence of site control for our project will be a written governmental agreement providing for phased residential and commercial development of 12 acres, including a senior LIHTC submission for this round that will be on approx. 2.5 acres of the 12. Will this agreement suffice for purposes of meeting MFA's site control requirement? Does the 2.5 acres have to be fully platted at time of initial application? Will a title search of the entire 12 acres be acceptable? Should we provide a legal description for the 12 or 2.5 acres?
A9: As long as the agreement describes the 2.5 acres dedicated to that project, and it is clear that this project is the only project eligible for that 2.5 acres, that should suffice for site control. The full 12 acres title search is fine, and it does not need to be platted yet. We would want the 2.5 acres legal description to be used.
Q10: Can we receive a waiver to allow a delay of the title report requirement due to COVID-19 preventing title companies from timely reporting?
A10: If there is documented evidence that attempts have been made to obtain the item, and that due to COVID there is a delay or current issue obtaining the application item, we will be able to grant an extension to the receipt of the application item to Carryover, in the event of an award. This extension will only be granted if there is documentation of attempt and a narrative requesting the extension of the requirement.
Q11: The evidence of site control for our project is a written governmental Purchase, Sale and Development Agreement providing for six phases of residential and commercial development. Exhibit B of the agreement shows a development timeline and a map with the location of each phase. Phase 3 on the map is the senior housing component for which we are submitting the LIHTC application this round. The Purchase, Sale and Development Agreement refers to Exhibit B for the required developments on the larger site but doesn’t identify specifically in the body of the agreement that Phase 3 is restricted to senior housing. Will this map showing the location of the senior housing be sufficient evidence for site control purposes since it shows the approximate area dedicated to our project? We will have a legal description for the project based upon the architect's site plan included in the lender's design package submitted in the LIHTC app.
A11: It is difficult to provide a definitive answer without reviewing the full Governmental Development Agreement, but because this is a government-owned parcel, as long as the Governmental Development Agreement identifies a 2.5 acre parcel being available for the Project, the map shows the location of the parcel, and the Agreement clearly identifies the transfer of the parcel to the project, we would accept the Agreement as proof of site control.
Q12: Compliance Affidavits for Individuals that are employees of Non-Profit organizations – Unless an individual has a separate interest in a federally subsidized housing project, the Schedules H and Compliance Affidavits for each entity involved in the development cover all possible non-compliance issues and an individual Schedule H for non-profit staff is unnecessary. The Compliance Affidavits are designed to address For Profit organizations. As a not-for-profit organization, individual employees or executive staff do not benefit from any gain realized by development activities. Therefore, we do not believe board members, executive staff, or other principals in the organization should be required to sign and have notarized compliance affidavits as individuals. Can we provide a statement to this effect (member of a non-profit and no interest in federally subsidized project) in lieu of a Schedule H and Affidavit for our executive director?
A12: We understand that the non-profit general partner will be completing Schedule H and the Compliance Affidavit and both will be signed by a person authorized to sign on the general partner’s behalf. We do not require that non-profit board members or executive staff submit separate Schedule H’s or Compliance Affidavits, unless they have separate interest in a Low Income Housing Tax Credit or other federally financed multifamily housing project in the United States.
Q13: Our team works in other states with LIHTC programs and is grateful that the state housing agencies made numerous modifications to their application processes to address safety issues during COVID-19. Our team is requesting that the MFA team consider some of the modifications below due to the severe nature of the pandemic and the current travel restrictions from Governor Lujan Grisham.
Here are suggested modifications:
1) Not requiring a notary for any of the application forms
2) Considering e-signatures for application documents
3) Considering an electronic submission versus a hard copy submission of the full application.
We know this is challenging for staff but we also think it is dangerous for LIHTC applicants to be moving around New Mexico engaging numerous people in-person in order to submit under the current requirements.
A13: Due to COVID-19, MFA will accept electronic signatures completed through a third party verified e-signature process (e.g. DocuSign, Adobe Sign, etc.) on any of the required documents, however if the document requires notarization, that will still be required. NM does not currently allow digital notaries, but there is an option for a notary to witness a signature virtually via audio-video technology. For further guidance, please see the Executive Order of the Governor of the State of New Mexico at https://www.governor.state.nm.us/wp-content/uploads/2020/06/Executive-Order-2020-039.pdf and instructions from the New Mexico Secretary of State at https://www.sos.state.nm.us/notary-and-apostille/notary-commissions/. Please be sure to adhere to the regulations applicable to the state the signatory is physically in when they sign the document (for example, if the signatory is in Colorado, the rules and allowances regarding virtual and electronic notaries in Colorado apply, and MFA will recognize whatever that state’s position on notaries may be). Again, if the document is signed in New Mexico, the notary page will still have to have a hard copy signature, but the signatory may utilize an e-signature.
We will still be requiring hard copy applications, so the documents with e-signatures must be printed and submitted in the hard copy application. If for any reason the e-signature does not satisfy MFA’s documentation requirements, there will be a five-day correction period to submit a hard signature. As we mentioned in a previous FAQ, MFA recognizes the current conditions related to mail and delivery delays, so as long as the hard copy is sent prior to the deadline of January 15, and a receipt is uploaded with the electronic copy showing that it was sent via USPS, FedEx, UPS, or other carrier service ahead of the January 15 deadline and showing a requested delivery date no later than January 15, we will accept the hard copy if it physically arrives late. There will be no leeway for hand deliveries to the MFA office or the electronic submissions, which must be fully uploaded to our file sharing site: https://mfa.internal.housingnm.org/FileTransferHD by 4 p.m. on January 15, 2021, as stated in the QAP.
Q1: Can a purchase contract be contingent upon a tax credit award?
A1: The requirement is that the site control, without this and other contingencies noted in the QAP, extend until the end of the month following the month in which the MFA board of directors confirm the tax credit awards. As long as this is the case, we do not mind contingencies.
Q2: Can you prepay the monitoring and include it in the development budget?
A2: Yes, the compliance fees can be paid in full and included in the development budget as a capital expense.
Q3: Are Market Rate Units capped at HUD FMR or can they exceed these rents?
A3: Market rate units may charge whatever rent the market will bear, but for underwriting purposes, we will look to the market study to confirm proposed rent levels.
Q4: After an award, can potential savings from soft costs/lease up reserves and/or developer fee be redirected to hard costs/additional project improvements as long as Total Development Cost does not increase?
A4: Yes, if there are cost savings from development those capital dollars can be redirected to other project improvements, as long as the Total Development Cost does not increase and any category caps are not exceeded.
Q5: The application requires designation of unit types and assignment of an AMI. How are the management or staff units represented on the application?
A5: At application, all units must be designated a unit type and assigned an AMI. Management units do not need to be indicated on the application for LIHTC. The management unit does not need to meet a set aside, as it is considered “common space necessary for the operation of the property” and is therefore removed from the applicable fraction. For example, if a building has 10 units (10/10) the management unit is removed from the numerator and the denominator creating an applicable fraction of 9/9 and retains 100 percent affordability. When a management unit is vacated, the unit must be returned to the applicable fraction of 10/10 by occupying the unit with a tax credit qualified resident at the assigned, applicable AMI. Management Units must be approved by MFA’s Asset Management department to be considered exempt from the applicable fraction calculation.
Q6: Can a project with USDA RD PBRA receive the state-designated basis boost if it meets the housing priority requirements, i.e. Housing with Children?
A6: Yes, if the project has USDA RD PBRA, and will be serving a Housing Priority Population, they are eligible for the state-designated basis boost.
Q1: If we are performing a rehab of a previous tax credit project that elected the 40 percent at 60 percent AMI, can we then elect the Average Income method and change the previous LURA to allow 80 percent AMI renters?
A1: We reviewed this question further after the QAP training, and have revised our response. If there is an existing LURA, then the original set asides may still need to be met, so we would need to review a request for using Average Income on a case-by-case basis. We recommend you discuss your particular project with MFA staff before submitting an application.