93-025 - Laserfiche WebLink

Home Browse Search

Financing/Subsidy Resources Under the provisions of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (the Act), the owners of federal, mortgage subsidized affordable housing interested in continuing to operate the housing, are entitled to incentives sufficient to yield eight percent of the preservation equity of the project, limited by the federal cost limits and subject to appropriations. Incentives available include rent increases, increases in Section 8 contract rents, additional Section 8 certificates, access to excess reserves, and residual receipts, flexible subsidies, or Section 241(d) insurance for capital improvements, equity take-out loans under Section 241(f), and possible redirection of Section 236 interest reduction payment to a second mortgage. These incentives are negotiated by the owner and the U.S. Department of Housing and Urban Development and must be sufficient to cover the annual authorized return, debt service on any rehabilitation loan, debt service on the HUD mortgage, operating expenses, and adequate reserves. Owners of federal mortgage subsidized affordable housing interested in a voluntary sale to a priority purchaser such as a tenant council, nonprofit corporation, or state/local agency can trigger the availability of HUD financial assistance subject to appropriations. Through this approach HUD must provide assistance sufficient to enable acquisition at a purchase price not greater than the project's preservation value, to pay the debt service on the mortgage and any rehab loan, to meet project operating expenses and adequate reserves, and to receive an adequate return on any cash investment made to acquire the project. Priority purchasers have access to the following assistance, some of which is unavailable to other qualified purchasers: 1) Insurance for financing up to 95 percent of the preservation equity under the Section 241 (f) program; 2) Grants up to the present value of the total of projected published fair market rents for Section 8 existing housing for the next ten years; and 3) Reimbursement for certain transaction expenses. The Low-Income Housing Preservation and Resident Homeownership Act of 1990 does not cover Section 8 opt - outs, and expirations, and owners retain the decision whether or not to remain in the program, after receiving an offer from HUD to increase the contract rents up to the Section 8 existing fair market rent. Additional federal, state, and local resources available to assist in preserving subsidized affordable housing include the following: Home Inv~tment Pa~ne~hip Act (HOME) - The City of Santa Aha expects to receive $1,600,000 in HOME funds for fiscal year 1993. To the extent permissible under federal regulations the City is prepared to allocate a portion of this resource towards preserving affordable housing. 13