Annual | Monthly | |
Short-Term | 5.22% | 5.10% |
Mid-Term | 4.43% | 4.34% |
Long-Term | 4.46% | 4.37% |
Annual | Monthly | |
Short-Term | 5.30% | 5.17% |
Mid-Term | 4.69% | 4.60% |
Long-Term | 4.83% | 4.72% |
Annual | Monthly | |
Short-Term | 5.26% | 5.13% |
Mid-Term | 4.82% | 4.71% |
Long-Term | 5.03% | 4.92% |
Annual | Monthly | |
Short-Term | 5.00% | 4.89% |
Mid-Term | 4.37% | 4.28% |
Long-Term | 4.54% | 4.45% |
Annual | Monthly | |
Short-Term | 4.68% | 4.59% |
Mid-Term | 3.98% | 3.91% |
Long-Term | 4.18% | 4.10% |
By Logan Wolfe
MHFA
Final CPA 10% Carryover Certifications: 5/1/2024
Minnesota Housing HTC Round 2: To be announced. Mahoney anticipates a deadline the deadline to be early in 2024.
CPED/St. Paul PED
Final CPA 10% Carryover Certifications: 5/1/2024
Dakota County CDA
Final CPA 10% Carryover Certification: 9/30/2024
Washington County CDA
Final CPA 10% Carryover Certifications: 5/1/2024
Hennepin County
The Coordinated Affordable Housing Development RFP will be released the first week of January 2024. The RFP Due date has yet to be announced. Mahoney anticipates a deadline early in February of 2024.
Ramsey County
Housing Development Solicitation expected to open February of 2024. Mahoney anticipates a deadline of mid-March 2024.
2024 Tax Returns
Individuals and C Corporation: 4/15/2024
S Corporation, Partnership: 3/15/2024
Non-Profit: 5/15/2024
Other
Deadline to provide employees or independent contractors their W-2, 1099-NEC, or 1099-Misc -January 31, 2024
MMB applications are due the first Monday in January.
Housing pool allocation: Commencing on the second Tuesday in January and continuing each Monday through the last Monday in June, the commissioner shall allocate available bonding authority from the housing pool to applications received on or before the Monday of the preceding week for residential rental projects that meet the eligibility criteria under section 474A.047.
By Jeff DeGree
If you are involved on the compliance side of affordable housing, you have no doubt already heard about HOTMA – the Housing Opportunities Through Modernization Act. HOTMA brings a multitude of changes on how we certify income and review assets for potential and current tenants, and it is critical that these changes are well understood to keep your properties in compliance if your properties involve HUD, LIHTC, NHTF, or HOME.
Passed into law in 2016, the final rule was released in early 2023 with some changes going into effect after 30 days of the release, and the remaining changes effective as of January 1, 2024. Not all changes will be applicable to all four of the previously mentioned programs, with some only affecting HUD or some combination of the other three. Changes to the program include the definitions for net family assets and annual income, an updated list of annual income exclusions, determinants for annual recertifications, treatment of adjusted income, and requirements for asset verifications.
In the past, the regulations surrounding income and what was includable focused on just that, what income needs to be included. Under HOTMA the focus is on what income is excluded, and a listing of these items is available through HUD. The hierarchy of acceptable forms of income verification has also changed. Previously we held verifications directly from a third-party in the highest regard. They now fall to third on the list, after the new top preference of a UIV (upfront income verification), or second a third-party verification provided by the tenant such as paystubs. For paystubs received from a tenant, the requirement has gone down from the previous standard of four to six paystubs, to only two. Regarding annual benefits like social security, the previous practice was to obtain statements dated within 120 days of the tenant move-in. It is now acceptable to take a statement from the year in question.
When considering assets, similar to income we now have a list of exclusions versus includable items. For verifications, the previous threshold for requiring verification of $5,000 has been increased to $50,000, but we also must take into consideration “necessary” versus “non-necessary” property, and even if assets are over $50,000, we must include income that can be calculated. Of note, the $50,000 standard applied to LIHTC will have to be approved by your state. A change that will make asset verification easier will be the elimination of the requirement to average six checking statements, with the new requirement being only the balance on the most current statement.
The items we have discussed here only scratch the surface of the changes related to HOTMA, providing just a glimpse of the full rule changes. If you have questions or concerns about how HOTMA will affect your properties, please reach out to us at any time.
The low-income housing tax credit (LIHTC) program is used to encourage the development and rehabilitation of affordable rental housing. It was created in 1986 and made permanent in 1993. Federal tax credits are awarded to developers for reserving a certain portion of the rental units to be rent-restricted for lower-income households. These dollar-for-dollar reduction in federal tax liability tax credits are then claimed over a 10-year period. While the credits are federal tax credits, the LIHTC program administration is on a state level.
9% Credits vs. 4% credits:
The LIHTC is designed to subsidize the development of low-income unit costs in a project. The 4% tax credit is used for new construction or rehab projects and/or the acquisition cost of existing buildings. The 9% tax credit is used in new construction or rehab projects.
The annual pool of 9% tax credits is available federally per state by population. The approximate state allocation of credits per year can be calculated by taking: State Population x $2.75 (2023 amount, increasing annually)
The amount of 4% tax credits available varies from state to state as well, but there is not a defined pool of credits (as there is with 9% credits). In order to qualify for 4% tax credits, at least 50% of the aggregate basis of the project must be funded with tax-exempt private activity bonds subject to volume cap. The number of projects that are awarded a bond allocation are determined by the amount of bonds issued by the state.
Calculation of Annual Tax Credits
The example calculation below will use the following information: new construction project, $28,000,000 of eligible basis, located in a qualified census tract (QCT), 100% applicable fraction.
*smaller of unit fraction or floor-space fraction
Eligible Basis may include costs such as:
• Construction costs
• Construction loan interest
• Developer fee
• Architect and engineering
• FF&E
• Amortization of financing fees during construction period
• Other hard and soft costs
Non-Eligible Basis:
• Land
• Marketing
• Partnership organization costs
• Commercial property
• Amenities tenants pay a separate fee for or not offered to all tenants
• Syndication
• Finance Fees
• Other
Projects are often eligible for a 30% basis boost when located in the following areas:
• Qualified Census Tracts (QCTs) – 50% or more of households have income less than 60% of area median income (HUD provides income amounts)
• Difficult Development Area (DDAs) – high construction, land, and utility costs relative to area median income (HUD provides income amounts)
• States can award up to 30% basis boost to make the project “financially feasible” for 9% projects that are not eligible for QCT or DDA
• If in QCT and DDA, property can only qualify for up to 30% (cannot combine and use 60%)
Minimum Set-Aside, Income Limits, Rent Limits
Applicable fraction is the percentage of low-income households in the building(s).
Minimum set-aside
• Set aside at least 20% of units for households with incomes at or below 50% of area median income OR
• Set aside at least 40% of units for households with incomes at or below 60% of area median income OR
• Average income test (AIT) – must designate an income limitation for each low-income unit (between 20% and 80% of area median income, in 10% increments), and the average of those units must be at or below 60% of area median income.
How Credits are Earned, Claimed and Recaptured
Credits are received/claimed over a 10-year tax credit period but earned over the 15-year compliance period. Accelerated credits are the credits received early in the first 10-year period for the last 5 years of the compliance period. If each low-income unit is not occupied by a qualified tenant by January 31st of the first year of the credit period, a portion of the first-year credits may be delayed. The delayed portion of the first-year credits is allowed in the 11th year.
Credits that are eligible to be recaptured are the accelerated credits, not the credits that have already been earned. After the 15-year compliance period when the credits have already been fully earned and utilized, credits are safe and can no longer be lost.
Mahoney Development Services, LLC (MDS), an affiliate of Mahoney assists Real Estate Developers and Investors with consulting and advisory services to manage the busy development projects in their Real Estate portfolio. See below for what’s going on at MDS.
The Real Estate Solutions Team at Mahoney has been out and about attending various firm events and affordable housing events in our community. Please take a look and see where we have been recently.
Hello, my name is Kyle Krenske. I started at Mahoney in June 2020 with over a decade of public accounting experience ranging from large to small public accounting firms. I graduated from Minnesota State University, Mankato in 2009. I am part of our Tax Solutions Team and Real Estate Solutions Team. I enjoy helping clients with strategic planning, projections, real estate, and anything compliance related.
I am originally from Faribault, MN and had lived there for over 30 years. I am married with two children. We moved to Northfield, MN in 2019 where we currently reside. Next year, 2024, marks Heather and I’s fifteenth wedding anniversary. I am very family oriented.
Outside of the office I enjoy doing things with my family and anything outdoors. After Thanksgiving this year, we took a family vacation to Saint Croix, USVI. We spent most of our time on the beach, at the pool, and snorkeling. It was an amazing experience, and we all enjoyed the island life. We went on a snorkeling tour to Buck Island where the sandy beach is incredible, and the coral reef is amazing to view. I had too close of an encounter with a large Barracuda off Buck Island that I will never forget; fortunately, the family was not nearby as I had swum out further from the group.
Other outdoor activities that I really enjoy are skiing, golfing, and fishing. We bought a family ski pass to Welch Village this year. I am looking forward to several trips with the family to the slopes. Last year I went skiing in the mountains for the first time at Breckenridge and Vail, CO.
Something interesting about me. I have a Commercial Driver’s License (CDL). I drove over the road part time from 2012 through 2017. I do not drive over the road regularly anymore, but I occasionally still drive a semi, so I keep my CDL active.
If you have any questions, please feel free to reach out to me at kkrenske@mahoneycpa.com or connect with me on LinkedIn.
*Photo credit in this section to Kyle Krenske
10 River Park Plaza, Suite 800
Saint Paul, MN 55107
(651) 227.6695
Fax: (651) 227.9796
info@mahoneycpa.com
© 2024 Mahoney | Privacy Policy
Mahoney Ulbrich Christiansen & Russ, PA