The National Council of State Housing Agencies (NCSHA) has revised its recommended practices with changes that further stress the prudent use of low-income housing tax credits (LIHTCs).
NCSHA recently updated the per-unit cost limits section of its recommended practices for LIHTC allocation and underwriting.
“Each Allocating Agency’s cost limit standard and/or policies should acknowledge that the total cost of a development may sometimes be higher than good public policy and prudent resource allocation should allow, even if individual cost components may be justified and considered reasonable in other contexts. It should recognize that some markets, property characteristics, and circumstances individually or together may be cost-prohibitive for Housing Credit development,” reads one of the new additions.
In addition to comparing a development’s cost with the agency’s standard and with comparable developments in the market, agencies “should compare it to the cost of other developments competing within the same allocation cycle to identify any cost items outside of the norm,” said NCSHA. “The agency should require that such cost outliers be examined and reduced unless the sponsor provides a compelling reason as to why they are warranted that is acceptable to the agency.”
Housing finance agencies are cost conscious, said Garth Rieman, NCSHA’s director of housing advocacy and strategic initiatives. The revisions serve as good points to keep in mind when allocating their resources.
The update comes as several agencies face increased scrutiny over the costs of developing affordable housing.
In another new recommendation, NCSHA urges allocating agencies to require sponsors to certify that they have disclosed all of the development’s funding sources and uses and will disclose any future changes in funding.