Notice2023-05045
Administrative Guidelines: Subsidy Layering Review for Project-Based Vouchers
Primary source
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Published
March 13, 2023
Issuing agencies
Housing and Urban Development Department
Abstract
This notice provides updated Administrative Guidelines (Guidelines) and requirements for Project-Based Voucher (PBV) Subsidy Layering Reviews (SLRs) and SLR requirements for Mixed-Finance projects that may or may not include PBV assistance. This updated notice provides transparency on HUD's expectations regarding cash flow, debt coverage ratios, net operating income, operating expense trending requirements, and expands guidance related to expense coverage ratios, when projects do not have hard debt. This notice also introduces a new mailbox (PBVSLRs@hud.gov) for SLRs requests to be performed by HUD HQ, and for SLR certifications and supporting documentation for SLRs the Housing Credit Agencies (HCAs) completed. Finally, the guidance expands the delegation of SLRs to HCAs to cases where PBV assistance is combined with other government assistance. Previously, the delegation only covered cases that included Low-Income Housing Tax Credits (LIHTCs). Otherwise SLR cases had to be completed by HUD (see overview chart in Section IV).
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<title>Federal Register, Volume 88 Issue 48 (Monday, March 13, 2023)</title>
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[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15443-15448]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-05045]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6359-N-01]
Administrative Guidelines: Subsidy Layering Review for Project-
Based Vouchers
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Notice.
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SUMMARY: This notice provides updated Administrative Guidelines
(Guidelines) and requirements for Project-Based Voucher (PBV) Subsidy
Layering Reviews (SLRs) and SLR requirements for Mixed-Finance projects
that may or may not include PBV assistance. This updated notice
provides transparency on HUD's expectations regarding cash flow, debt
coverage ratios, net operating income, operating expense trending
requirements, and expands guidance related to expense coverage ratios,
when projects do not have hard debt. This notice also introduces a new
mailbox (<a href="/cdn-cgi/l/email-protection#a9f9ebfffae5fbdae9c1dccd87cec6df"><span class="__cf_email__" data-cfemail="2d7d6f7b7e617f5e6d455849034a425b">[email protected]</span></a>) for SLRs requests to be performed by HUD HQ,
and for SLR certifications and supporting documentation for SLRs the
Housing Credit Agencies (HCAs) completed. Finally, the guidance expands
the delegation of SLRs to HCAs to cases where PBV assistance is
combined with other government assistance. Previously, the delegation
only covered cases that included Low-Income Housing Tax Credits
(LIHTCs). Otherwise SLR cases had to be completed by HUD (see overview
chart in Section IV).
FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez Sanchez, Director,
Housing Voucher Financial Management Division, telephone number 202-
402-4212 or Belinda Bly, Supervisor, Urban Revitalization Division,
telephone number 202-402-4104 (neither are toll free numbers).
Addresses for both: c/o Office of Public and Indian Housing, Department
of Housing and Urban Development, 451 7th Street SW, Washington, DC
20410. HUD welcomes and is prepared to receive calls from individuals
who are deaf or hard of hearing, as well as individuals with speech and
communication disabilities. To learn more about how to make an
accessible telephone call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Background
In support of HUD's mission to create quality affordable housing,
HUD provides funding assistance to incentivize affordable housing
development. Subsidy layering reviews (SLRs) are undertaken to ensure
the amount of assistance provided by HUD is not more than necessary to
make the PBV project feasible in consideration of all other government
assistance. SLRs prevent excessive public assistance that could result
when a development proposes combining (layering) the HAP subsidy from
the PBV program with other public assistance from Federal, State, or
local agencies, including assistance through tax concessions or
credits.
SLRs for PBV assistance are required pursuant to Section 8(o)(13)
of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)); Section
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008
(HERA); and Section 102 of the Department of Housing and Urban
Development Reform Act of 1989. SLRs are only for proposed PBV new
construction and rehabilitation projects as defined in 24 CFR 983.3.
Under the current PBV regulations at 24 CFR 983.55(b), the SLR must be
completed prior to execution of the Agreement to Enter Into a Housing
Assistance Payments Contract (AHAP).
SLR requirements are not applicable to existing housing.\1\ PBV
regulations at 24 CFR 983.3 define existing housing as units that
already exist on the proposal selection date that substantially comply
with Housing Quality Standards (HQS) on that date. (The units must
fully comply with the HQS before execution of the HAP contract.) In
addition, no SLR is required when PBV is the only government assistance
provided to a project.
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\1\ Section 2835(a)(1)(F) of Housing and Economic Recovery Act
of 2008 (Pub. L. 110-289), enacted July 30, 2008, does not require
subsidy layering review for existing housing.
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Pursuant to 24 CFR 983.55, public housing agencies (PHAs) must
submit a request for an SLR for a proposed PBV project when the project
includes other government assistance. HUD can perform the SLRs in all
cases, and prior to issuance of this notice, the Department had
delegated SLR authority to participating Housing Credit Agencies (HCAs)
only when assistance included LIHTCs. This Notice expands the option to
delegate SLR authority to HCAs for proposed PBV projects when PBV
assistance is combined with other governmental assistance even if no
LIHTCs are included.\2\
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\2\ Pursuant to the Housing and Community Development Act of
1992 (Pub. L. 102-550, approved October 28, 1992), as amended by the
Multifamily Housing Property Disposition Reform Act of 1994 (Pub. L.
103-233, approved April 4, 1994) added a ``Subsidy Layering Review''
provision at 42 U.S.C. 3545.
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In cases where PBV projects do not include LIHTCs, but there is a
participating HCA in the project's jurisdiction, the HUD Field Office
will ask the HCA whether they can perform the SLR. However, the PHAs
may request that the HUD HQ perform the SLR. If PHAs do not request
that HUD HQ perform the SLR, the HUD Field
[[Page 15444]]
Office will ask the HCA first, but if the participating HCA is not
available to perform the SLR, the HUD Field Office will refer the case
to HUD HQ to perform the SLR. HUD recommends that PHAs communicate in
advance with the participating HCAs (and/or HUD Field Offices) about
the upcoming PBV projects that do not include LIHTCs so HCAs can
confirm whether they can perform the SLRs.
II. Subsidy Layering Review
A. Definitions
Housing Credit Agency: For purposes of this notice, an HCA is a
state housing finance agency or other state agency defined by Section
42 of the Internal Revenue Code of 1986. HCAs are sometimes referred to
by other names, such as State Housing Finance Agencies or State Housing
Corporation. A participating jurisdiction under HUD's HOME Investment
Partnerships program (see 24 CFR part 92) may also serve as an HCA.
Mixed-finance development: Development or modernization of public
housing pursuant to 24 CFR 905 Subpart F, where public housing units
are owned by an entity other than a PHA.
Other government assistance: Any loan, grant, guarantee, insurance,
payment, rebate, subsidy, tax credit, tax benefit, or any other form of
direct or indirect assistance from the Federal government, a State, or
a unit of general local government, or any agency or instrumentality
thereof.
B. Requesting a SLR for a PBV Award
When a PHA selects a project that is either new construction or
rehabilitation, as defined in 24 CFR 983.3, for a PBV award, and the
project will include forms of government assistance other than PBVs,
the PHA must request an SLR. PHAs request an SLR through their local
HUD Field Office or, if eligible, through a participating HCA. A list
of participating HCAs is posted and updated periodically on the Housing
Voucher Financial Management Division (FMD) website, found at: <a href="https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fmd">https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fmd</a>. The
participating HCA may charge a fee to perform the SLR, which the PHA
may pay using Administrative Fees or Administrative Fee reserves.
The PHA is responsible for collecting all required documentation
for the SLR from the project owner. A list of required documentation is
included in Appendix A. If after the initial submission new information
becomes available, the PHA is responsible for submitting updated
information to HUD or the HCA. The PHA maintains a project file with a
complete set of the required documents. As part of the project
selection process and application for PBVs, the project owner must
disclose all HUD and/or other Federal, State, or local government
assistance committed to the project, as well as other government
assistance, using Form HUD 2880 (even if no other government assistance
is received or is anticipated). If PBV is the only government
assistance, an SLR is not required. Whether the PHA or HCA performs the
SLR, the PHA must confirm that no form of disclosed assistance renders
the project ineligible for PBV assistance and does not violate 24 CFR
983.54.
The owner must inform the PHA if any information changes during or
after the application process, either by the addition or deletion of
other government assistance. The project owner must provide revised
information to correct the earlier submissions to reflect the new
information. If at any time during or after the application process,
the owner receives supplemental HUD or new government assistance for
the project that results in changes in project financing, or changes in
the number of PBV units, the owner must submit such changes to the PHA
and the PHA must notify HUD or the HCA .\3\ The SLR application should
not be submitted to HUD until all financing of the project has firm
commitments from all lenders. The AHAP requires that the owner disclose
to the PHA information regarding any related assistance from the
Federal government, a State, or a unit of general local government, or
any agency or instrumentality thereof, that is made available or
expected to be made available with respect to the contract units.
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\3\ 24 CFR 4.11.
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The PHA may not enter into the AHAP with the owner until the
environmental review is completed and the PHA has received the
environmental approval pursuant to 24 CFR 983.153(b). At the time of
initial submission of the SLR request, the PHA submits evidence that a
request for a 24 CFR part 58 review is submitted to the responsible
entity, or a 24 CFR part 50 review is submitted to the Field Office.
C. SLR Analysis and Safe Harbor Standards
When undertaking an SLR, HUD reviews both the development and
operating costs of a project to determine whether costs are within a
reasonable range, taking into consideration the project's size,
characteristics, location, costs, financing, and risk factors. Costs
that fall within acceptable safe harbor standards, as identified below,
may move forward without further justification. If costs exceed safe
harbor standards, then additional justification and documentation are
required to justify the costs based on risk factors, and HUD approval
is required.
If the review is by an HCA, project costs exceeding the safe harbor
standards must be consistent with the HCA's published qualified
allocation plan.
(A) Development Standards:
i. General Contractor Fees: The safe harbor standard is based on
hard construction costs. The maximum allowable combined contractor fee
is fourteen percent (14%) of the total for hard construction costs. For
example, if construction costs are $100,000, the safe harbor amount is
$14,000:
<bullet> Builder's General Requirements: 6% of construction contract
amount
<bullet> Builder's Overhead: 2% of construction contract amount
<bullet> Builder's Profit: 6% of construction contract amount
ii. Developer Fee: The safe harbor standard is a maximum of 15
percent. For projects combining public housing units and PBV units in a
Mixed-Finance project, safe harbors are 9 percent, requiring no
justification, above 9 percent and up to 12 percent, may be approved
with justification. Fees over 12 percent may be approved if the PHA
receives the amount over 12 percent and it is restricted for project
costs or future phases as described in the ``Cost Control and Safe
Harbor Standards for Rental Mixed-Finance Development,'' dated April 9,
2003, or any successor document. See Section D on Mixed Finance
Projects below.
(B) Operating Standards: The maximum initial term for a PBV HAP
contract is 20 years pursuant to Section 8(o)(13)(F) of the 1937
Housing Act as amended by HOTMA, although the initial terms for other
funding sources may be less. SLR requests must include an operating pro
forma that reflects each year of the HAP contract initial term. All
assumptions for income, expenses and debt must be clearly identified.
Both the Debt Coverage Ratio (DCR) and cash flow are analyzed on a
year-by-year basis. If a project has no permanent debt (e.g., Grants),
an Expense Coverage Ratio will be analyzed.
i. Debt Coverage Ratio: HUD and HCAs analyze the PBV development's
[[Page 15445]]
projected DCR both on a yearly basis and trended over the term of the
proposed subsidy period as an indicator of overall project health. As a
HUD metric for PBV purposes, the minimum DCR is 1.10 and the maximum is
1.45. The DCR for each year is determined by dividing the net operating
income for that year by the amount of the debt service for that year.
Factors such as operating cost increases, rent increases, project size,
unit and income mix, and vacancy rates affect net operating income.
Therefore, a trending analysis is also used to evaluate the DCR over
time and to determine whether the amount of assistance is excessive.
HUD recognizes that some projects may have higher upfront DCRs since
owners may frontload debt service to free up cash flow later in the
project period for higher anticipated operating expenses, or that some
projects may have higher DCRs in later years due to planned changes in
financing costs, interest rates, or partnership transfers. If a project
has an overall trending DCR outside the 1.10 to 1.45 range, the project
may have too much government assistance. If a project DCR trends
outside the range for an individual year, but has an overall trending
DCR within the range, HUD will require justifications from the owner or
PHA to understand the project's assumptions and yearly deviations. If a
project has no hard debt, it must demonstrate an Expense Coverage Ratio
(Gross Income divided by Total Operating Expenses) of no less than 1.10
and no higher than 1.45.
<bullet> Net operating income is defined as total operating income
minus total operating expenses. The net operating income for a project
must cover all repayable debt over the life of the HAP contract.
<bullet> Operating expenses should be trended at a consistent fixed
rate between 1 percent and 3 percent per year for the first 5 years and
3 percent thereafter. Justification for increases above 3 percent must
be provided.
<bullet> Rent increases should be trended yearly at a consistent
fixed rate between 2 percent and 3 percent per year. Justification is
required for increases outside this range.
<bullet> Vacancy rates must not exceed 7 percent.
<bullet> Debt service is defined as the funds required to make
payments on all non-forgivable loans, including any existing debt on
the property. Debt service does not include forgivable/soft loans, non-
repayable grants, non-repayable Federal, State, or local assistance,
deferred developer fees, financing fees, asset fees, partnership fees,
investor fees, compliance fees, management fees, capital contributions,
tax concessions, or tax credits.
If the projected DCR remains between 1.10 and 1.45 during the
initial term of the HAP contract, then it is assumed the project has
enough cash flow to pay operating expenses and amortized debt, and that
the amount of government assistance is not excessive. HUD will require
adjustments if the projected DCR or Expense Coverage Ratio in any one
year falls below 1.10 and continues to remain below 1.10 for a series
of subsequent years, as cash flow would not be enough to ensure stable
operations. Likewise, HUD will require adjustments if the projected DCR
exceeds the maximum of 1.45 in any one year and continues to remain
above 1.45 for a series of subsequent years.
ii. Cash Flow: For any given year of the project's operating pro
forma, cash flow may not exceed ten percent (10%) of total operating
expenses. Cash flow is defined as net operating income minus all
required debt service.
<bullet> If all or a portion of the developer fee has been deferred
and is owed, the face value amount of the deferred developer fee may be
deducted from cash flow. Accrued interest on the deferred fee may not
be deducted.
<bullet> Operational and replacement reserves may be deducted from
cash flow when reserves are adjusted by a consistent amount each year.
<bullet> No further adjustments to cash flow are permitted beyond
deferred developer fees, operational reserve contributions and
replacement reserve contributions.
If in any given year the annual cash flow is greater than ten
percent of total operating expenses and it remains above 10 percent, it
is assumed the cash generated from the government assistance is greater
than is necessary to make the project feasible. Therefore, adjustments
must be made by the project owner to reduce cash flow to 10 percent or
less of operating expenses. If the owner declines, HUD will reduce PBV
rents or the number of PBVs, so that the project complies with the 10
percent requirement.
D. Requesting a SLR for a Mixed-Finance Project
For Mixed-Finance projects that also include PBVs, the SLR is
handled as part of the Mixed-Finance project review process without a
separate PBV SLR review. SLRs for Mixed-Finance projects are only done
by HUD and may not be done by an HCA. Mixed-Finance reviews are done by
HUD's Office of Public Housing Investments (OPHI) at HUD Headquarters.
This provision also applies to Mixed-Finance projects with PBVs that
are undertaken as part of the Choice Neighborhoods Grant Program, as
well as Choice Neighborhoods projects that have PBVs, but no public
housing. This includes MTW local nontraditional development (LNTD)
proposals. OPHI prepares the SLR as part of the project review process
without a separate PBV SLR review.
As it relates to the PBVs, Mixed-Finance projects must comply with
the SLR standards identified above in the Notice. In addition to this
review, the project will also be reviewed to assure compliance with the
provisions of 24 CFR 905 Subpart F, and other applicable guidance,
including the following:
<bullet> The ``Cost Control and Safe Harbor Standards for Rental
Mixed-Finance Development,'' dated April 9, 2003, or any successor
document.
<bullet> Total Development Cost (TDC) and Housing Construction Cost
(HCC) limits imposed on the project, pursuant to HUD Notice PIH-2011-38
or successor notice.
<bullet> The HUD Pro Rata Test, which assures that the proportion
of HUD public housing funds committed to development of the project
does not exceed the proportion of public housing units in the project.
For example, if there are 120 units in the project and 50 are public
housing, 42 percent of the units are public housing. Therefore, the
amount of public housing funds contributed to the development of the
project may not exceed 42 percent of the development budget, including
hard and soft costs.
<bullet> HUD will review the amount of LIHTC equity to be invested
in the project to ensure that the sale of LIHTCs results in an amount
of net tax credit equity that is consistent with amounts generally
contributed by investors to similar projects under similar market
conditions, and that the amount is not less than 51 cents for each
dollar of tax credit allocation awarded to a project. If the project
receives 51 cents or less of LIHTC equity or does not receive a market
rate of equity, it is subject to additional review to reassess the
project's fees and costs.
E. SLR Outcome
(A) HUD: If HUD completes the SLR and determines the PBV assistance
complies with the standards set in this Notice, where the PBV
assistance will not result in excessive government subsidy, HUD will
certify compliance pursuant to 24 CFR 4.13 and the local HUD Field
Office will notify the PHA in writing.
If HUD completes the SLR and determines that the amount of
[[Page 15446]]
government subsidy, including the PBV assistance, is excessive, HUD
notifies the PHA. The notification includes a recommendation to reduce
the amount of PBV assistance or a determination that PBV assistance
cannot be provided. Once the PHA receives HUD's decision, the PHA must
notify the owner in writing of the outcome and work with the owner to
restructure, as needed. Revised materials must then be resubmitted to
the HUD Field Office for review.
(B) HCA: If an HCA completes the SLR and determines that PBV
assistance complies with the above standards of this notice and does
not result in excessive government subsidy, the HCA must notify the PHA
and submit a certification to HUD at <a href="/cdn-cgi/l/email-protection#7c2c3e2a2f302e0f3c140918521b130a"><span class="__cf_email__" data-cfemail="b7e7f5e1e4fbe5c4f7dfc2d399d0d8c1">[email protected]</span></a> with a copy to the
Director of the local HUD Office of Public Housing (<a href="https://www.hud.gov/program_offices/public_indian_housing/about/field_office">https://www.hud.gov/program_offices/public_indian_housing/about/field_office</a>)
stating that the PBV assistance to be provided is in accordance with
HUD SLR guidelines in this Notice and that a determination has been
made that it does not result in excessive government subsidy. The AHAP/
HAP contract may then be executed if the environmental approval is
received. If the SLR is performed by an HCA, subsequent approval of the
SLR by HUD is not required. The HCA certification must include the
documents outlined in Section III. See Appendix C for a sample HCA
certification letter and Appendix A for required information.
If the HCA SLR determines the public assistance amount is
excessive, the HCA must notify HUD, in writing, with a copy to the PHA.
The notification will include either a recommendation to reduce the
amount of PBV assistance or the amount of LIHTC allocation or a
determination that PBV assistance cannot be provided. HUD will consult
with the HCA and the PHA prior to issuing a final determination to
adopt the HCA's recommendation or to revise it. The PHA must notify the
owner in writing of the outcome and work with the owner to restructure,
as needed. Revised materials must then be resubmitted to the HCA and
the HUD Field Office for review.
When a proposal for PBV assistance is contemporaneous with the
application for or award of LIHTCs or other government approved funds
and state resources, the required SLR may be fulfilled by the HCA (in
accordance with Section 42(m)(2) of the Internal Revenue Code (IRC)) if
such review substantially complies with the HUD SLR requirements and
guidelines.
(C) Mixed-Finance Projects: If HUD completes the SLR and determines
the PBV assistance and other public housing assistance complies with
the above standards of this Notice for Mixed-Finance projects and thus
does not result in excessive government subsidy, HUD will certify
compliance pursuant to 24 CFR 4.13 and notify the PHA.
For projects that fail to comply, HUD will notify the PHA, which
must (i) work with the owner to restructure the project so it complies
with the above standards for Mixed-Finance projects and resubmit the
revised documentation to HUD for approval, or (ii) provide sufficient
justification to HUD to allow HUD to approve a variation(s) from the
above standards.
F. SLR Timing
In accordance with program regulations at 24 CFR 983.55, a PHA may
not execute an AHAP contract until after the SLR is completed and
approved by HUD or the HCA. The AHAP also may not be executed until
there is a completed environmental review (ER) and written approval by
the responsible entity or HUD, pursuant to 24 CFR part 50 or part 58
and PIH Notice 2016-22. The local HUD Field Office must receive the
completed SLR and either approve the Request for Release of Funds or
complete a part 50 environmental review prior to notifying the PHA that
it may execute the AHAP. The PHA may request an SLR and environmental
review simultaneously. The Field Office confirms to the FMD and/or the
HCA that the ER process is complete.
If the owner reports to the PHA the addition of any other
government assistance before or during the AHAP contract when no SLR
was initially required because the project had not received and did not
anticipate receiving other government assistance, then an SLR is
required to be requested by the PHA at the time of the owner's report.
III. Housing Credit Agency Participation and Certification
State HCAs are state-chartered authorities established to assist
and meet the affordable housing needs of their states' residents.
Housing Credits (LIHTC, Historic Tax Credits, etc.), Housing Bonds, and
HOME Investment Partnerships (HOME) are the federally authorized
programs at the center of HCA activity within the states. Through these
programs and other Federal and State resources, HCAs have initiated
hundreds of housing programs, rental, special needs housing and even
homeownership. Prior to issuance of this notice, HUD had delegated SLRs
to authorized HCAs (that submitted an intent of participation to HUD
for approval) for proposed PBV projects that include LIHTCs as part of
the proposed financial assistance. (HCAs were ordinarily designated for
the purpose of allocating and administering the LIHTC program under IRC
Section 42). HUD is herewith expanding the authority to participating
HCAs to conduct SLRs in cases where LIHTCs are not included, but other
government assistance is included. Currently 31 states have a HUD-
approved HCA; the remaining states may seek HUD approval to conduct
SLRs for PBV projects by submitting a letter to HUD notifying HUD of
their intent to participate. Appendix B contains a sample letter.
Pursuant to the requirements outlined herein, as well as the
Memorandum Of Understanding (MOU) between participating HCAs and HUD,
HCAs are required to provide notification to the FMD through the FMD
mailbox of any SLRs approved on HUD's behalf by no later than 30 days
from the date of authorization. Notifications of approval must contain
the following documentation:
<bullet> Copy of the Signed HCA Certification as shown in Appendix C
<bullet> The HCA's Internal Recommendation and Sign-off
<bullet> The Developer's Disclosure of Sources and Uses of Funds
<bullet> The Developer's Operating Pro Forma Considered
<bullet> Copy of the PBV Commitment/Award Letter
<bullet> HUD Form 2880, and
<bullet> Rent Information and Project Summary. The information on these
fields is collected for reporting purposes only.
a. Project Name and Address
b. PHA name and code
c. Field Office name and code
d. HCA Name
e. PBV Type: Rental Assistance Demonstration (RAD), Veterans
Assistance and Supportive Housing (VASH), and/or Regular
f. Tenant type: Elderly, Disabled, Homeless, Low-Income Families,
and/or Veteran.
g. Is the Project New Construction or Rehabilitation?
h. Amount Per Dollar of Syndication Proceed
i. Number of PBV Units Approved by Bedroom Size
j. Debt Coverage Ratio or Expense Coverage Ratio (if applicable):__
k. Project meets Cash Flow Criteria (Y/N)
[[Page 15447]]
IV. Overview Chart
The following chart summarizes the types of projects that require
an SLR, the entity authorized to perform the SLR and the required
certification. 102(d) Certification is the owner's certification of no
additional government funding using form HUD 2880.
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102(d)
Type of project and scenarios SLR reviewer certification
required?
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PBV subsidy without LIHTC. HCA or HUD *...... If by HCA,
However, project is new certification not
construction or rehabilitation, required.
as defined in 24 CFR 983.3, Otherwise, HUD
with 2 or more forms of other certifies.
government assistance.
PBV subsidy with LIHTC, new HCA or HUD........ If by HCA,
construction or rehabilitated certification not
project. required.
Otherwise, HUD
certifies.
PBV existing housing, as defined No SLR required... No.
in 24 CFR 983.3.
PBV new construction or No SLR required... No.
rehabilitated housing, but PBV
is the only form of government
assistance.
Mixed-finance projects, with or HUD............... Yes.
without LIHTC, with or without
PBV, with other forms of
government assistance.
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* PHAs may request that HUD perform the SLR if the project does not
include LIHTCs. If the PHA does not request that HUD perform the SLR,
the Field Office will refer the SLR request to a participating HCA.
V. Monitoring
HUD performs quality control reviews of SLRs performed by
participating HCAs by examining the following:
<bullet> If all required document and materials are available to the
reviewer
<bullet> If values are correctly determined within the approvable range
<bullet> If values are above safe harbor standards
<bullet> If documentation was provided to justify higher costs
<bullet> If the subsidy was reduced correctly (if applicable)
If any required documentation is not provided, or any portion of
the review is performed incorrectly, HUD requires appropriate
corrective action. When an SLR is performed by an HCA, subsequent
approval of the SLR by HUD is not required.
VI. Paperwork Reduction Act
The information collection requirements contained in this notice
are currently approved by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520)
assigned OMB control numbers 2577-0169. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection displays a valid control number.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
Appendix A: PHA Submissions
PHAs are responsible for collecting information from project
owners and assembling it in an SLR request submitted to the local
HUD Public Housing Field Office or HCA. SLR requests must contain
the following information. Assembly using a binder is recommended.
Incomplete submissions will be returned.
------------------------------------------------------------------------
Required elements of an SLR application & checklist Check
------------------------------------------------------------------------
1. Subsidy Layering Review request memorandum: Clearly
identify the PHA, the PHA number, the Field Office number,
the project's name, the project's total number of units,
and the number of PBV units requested. For a sample
memorandum see Attachment 1 of PIH Notice 2013-11 or newer
version superseding it.....................................
2. Project Description: Short narrative identifying
ownership, type of activity (rehabilitation or new
construction), location (including county), the project's
total number of units, number of PBV units requested, PBV
type (RAD, VASH, regular), utility allowances, bedroom
distributions, supportive services (if applicable) and
residential population (participants experiencing
homelessness, veteran, elderly, low-income families). The
narrative should also identify any exceptions applicable to
the project (e.g., number of PBV exceeding the Project
Cap). The information on item 2 is collected for reporting
purposes only..............................................
3. Accounting Statement of Sources and Uses of Funds:
Identifying each source and indicate type (loan, grant,
syndication proceeds, contributed equity). Sources
generally include only permanent financing and grants. If
interim financing or a construction loan is proposed,
provide details in project description. Separately identify
detailed uses, avoiding broad categories such as ``soft
costs.'' Under acquisition costs, identify purchase price
separately from related costs such as appraisal, survey,
title, recording and legal fees. Include separate line
items representing construction contract amount, builder's
general requirements, builder's overhead, builder's profit,
and total project costs. [Complete HUD Form 50156].........
4. Description of funding sources: Loans including
principal, interest rate, amortization, term, and any
accrual, deferral, balloon, or forgiveness provisions.
Describe any lender, grantor, or syndicator requirements
for reserves or escrows requirements. Describe if a lender
receives a portion of the net cash flow, either as
additional debt service or in addition to debt service.
Identify the amount of LIHTC and include IRS form 8609.....
5. Commitment Letters: Lenders and other funding sources
evidence their commitment to provide funding and disclose
significant terms. Signed commitment letters, conditional
commitment letters, loan agreements and grant agreements
meet this requirement. However, proposal letters and
letters of intent or interest do not meet this requirement.
6. Developer's Commitment Letter: Delineating any
arrangements, contributions, donations, significant terms,
or transfer of funds from the developer and/or
participating partners such as deferred developer's fees,
cash contributions, land donations and equity investments..
7. HOME Commitment Letter: (When applicable) Signed document
clearly identifying requirements of the HOME designated
units and intended rents...................................
8. Supportive Service Commitment: (When applicable) A signed
Memorandum of Understanding that describes the type of
services to be provided, frequency, terms of service and
resident eligibility.......................................
9. Appraisal Report: Based on the ``as is'' value of the
property, before construction or rehabilitation, and
without consideration of any financial implications of tax
credits or project-based voucher assistance. An appraisal
establishing value after the property is built or
rehabilitated is not acceptable unless it also includes an
``as is'' valuation. The appraisal date must be within
eighteen months of the SLR submission......................
[[Page 15448]]
10. Completed HUD Form 50156: The form must include the
Operating Pro Forma, construction and permanent budget,
projected rental, commercial, and miscellaneous gross
income, vacancy loss, operating expenses, debt service,
operational reserves contributions, replacement reserve
contributions, cash flow projections, debt service ratios;
as well as income and expenses trended at a consistent
percentage.................................................
11. Low-Income Housing Tax Credit Allocation Letter: Issued
by the authorized tax credit allocation agency, identifying
the amount of LIHTCs reserved for the project..............
12. Historic Tax Credit Letter: Issued by an authorized
historic credit agency, disclosing the estimated historic
tax credit amount awarded to a project located in a
designated historical area.................................
13. Equity Contribution Schedule: If equity contributed to
the project is paid in installments over time, provide a
schedule showing the amount and timing of planned
contributions..............................................
14. Bridge Loans: Providing details if the financing plan
includes a bridge loan where equity contributions proceeds
planned over an extended time can be paid upfront..........
15. Disclosure, perjury and identity of interest statement
(Form HUD-2880) completed by the owner.....................
16. PBV award letter: Identifying the housing authority's
approval of project-based voucher assistance for the
project by number of units and bedroom distribution........
17. PHA rent certification letter: Documenting proposed
contract rents, utility allowances, and gross rental
amounts for assisted units. Include rent reasonableness
documentation or comparability analysis as evidence of rent
determination and certification............................
------------------------------------------------------------------------
Appendix B: HCA Notice of Intent To Participate
U.S. Department of Housing and Urban Development, PIH Financial
Management Division, Room 4232, 451 Seventh Street SW, Washington,
DC 20410.
By: Email: <a href="/cdn-cgi/l/email-protection#1e6e7776307877707f707d777f7230737f707f797b737b706a307a7768776d7771705e766b7a30797168"><span class="__cf_email__" data-cfemail="66160f0e48000f080708050f070a480b07080701030b03081248020f100f150f0908260e130248010910">[email protected]</span></a>.
Re: Intent to Participate on Subsidy Layering Reviews
To Whom It May Concern:
The undersigned is a qualified Housing Credit Agency (HCA) as
defined under Section 42 of the Internal Revenue Code of 1986 and
hereby notifies the United States Department of Housing and Urban
Development (HUD) of our intention to conduct subsidy layering
reviews (SLRs) pursuant to HUD's requirements for the purpose of
ensuring the combination of assistance under the Section 8 Project-
Based Voucher (PBV) Program with other Federal, State, or local
assistance does not result in excessive compensation. By signifying
this notice, the undersigned hereby certifies that:
Required personnel reviewed the statutes identified in Federal
Register Notice (Insert new reference) Contracts and Mixed-Finance
Development, and 24 CFR 983.55.
The undersigned understands its HCA responsibilities and
certifies it will perform SLRs in accordance with all present and
future statutory, regulatory and HUD requirements. The undersign
acknowledges participation continues unless and until HUD revokes
this notice or the undersigned informs HUD, in writing with a 30-
day-notice of its decision to withdraw. Upon HUD approval, the
undersigned shall immediately assume the responsibility of
performing SLRs.
Name of agency and address:
Name, title, and address if authorized official
Phone, FAX, and email:
Date of execution:
Transmit signed and dated notice of Intent to Participate as a
PDF attachment to Miguel Fontanez at
<a href="/cdn-cgi/l/email-protection#b6c6dfde98d0dfd8d7d8d5dfd7da98dbd7d8d7d1d3dbd3d8c298d2dfc0dfc5dfd9d8f6dec3d298d1d9c0"><span class="__cf_email__" data-cfemail="b0c0d9d89ed6d9ded1ded3d9d1dc9eddd1ded1d7d5ddd5dec49ed4d9c6d9c3d9dfdef0d8c5d49ed7dfc6">[email protected]</span></a> with subject line
identified ``Submission of Notice of Intent to Participate.'' For
questions concerning the submission and receipt of the email, call
the Financial Management Division at (202) 402-4212.
Appendix C: HCA Certification
U.S. Department of Housing and Urban Development, PIH Financial
Management Division, Room 4232, 451 Seventh Street SW, Washington,
DC 20410.
By: Email: <a href="/cdn-cgi/l/email-protection#01514357524d5372416974652f666e77"><span class="__cf_email__" data-cfemail="18485a4e4b544a6b58706d7c367f776e">[email protected]</span></a>.
Re: Certification of Subsidy Layering Review
To Whom It May Concern:
For purposes of providing of Section 8 Project-Based Voucher
(PBV) Assistance authorized pursuant to 42 U.S.C. 8(o)(13), Section
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008
(HERA), Section 102 of the Department of Housing and Urban
Development Reform Act of 1989, and in accordance with HUD
requirements, all of which address the prevention of excess
government subsidy, I hereby certify that the PBV assistance is not
more than is necessary to provide affordable housing after taking
into account other government assistance for the following project:
Name, address of project:
Name, address of PHA:
Phone, FAX, and email:
Name, address of HCA:
Date of HUD's approval of HCA's intent to participate:
Name of Authorized HCA Certifying Official:
Signature of Authorized HCA Certifying Official:
Date:
Transmit signed and dated SLR certification as PDF attachments
to Miguel A. Fontanez at <a href="/cdn-cgi/l/email-protection#c9998b9f9a859bba89a1bcade7aea6bf"><span class="__cf_email__" data-cfemail="e2b2a0b4b1aeb091a28a9786cc858d94">[email protected]</span></a>, with a copy to the
Director of the local HUD Office of Public Housing: <a href="https://www.hud.gov/program_offices/public_indian_housing/about/field_office">https://www.hud.gov/program_offices/public_indian_housing/about/field_office</a>, with subject line identified ``SLR Certification-
Project Name, City, State''.
For questions concerning the submission and receipt of the
email, contact the Financial Management Division at
<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="e3b3aaabcda58a8d828d808a828fcdae828d8284868e868d97cda78a958a908a8c8da38b9687cd848c95">[email protected]</a>.
[FR Doc. 2023-05045 Filed 3-10-23; 8:45 am]
BILLING CODE 4210-67-P
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</html>Indexed from Federal Register on March 13, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.