A New Markets Tax Credit (NMTC) group is seeking clarification on the threshold for meeting the housing affordability and substantial rehabilitation requirements contained in the program’s allocation agreement.
In a letter to the Community Development Financial Institutions (CDFI) Fund, which administers the program, the NMTC Working Group explained that to be more competitive some applicants checked a box committing to make at least 20 percent of all housing developed as a result of its qualified low-income community investments would be affordable. This election became a requirement in the applicant’s allocation agreement.
The Working Group recommended that the affordability requirement be on an allocation-wide basis and that rent restrictions for rental housing be similar to those of the low-income housing tax credit (LIHTC) program.
It also recommended that once the rental units are determined to be affordable the owners should not be required to perform recertifications throughout the compliance period.
In addition, the group requested clarification on the definition of debt-to-income rate prescribed for for-sale housing units and recommended that the ratio include monthly mortgage costs such as mortgage principal and interest.
Made up of participants in the NMTC program, the group also addressed concerns about meeting the cost-basis threshold requirement of substantial rehabilitations. It wants to see provisions similar to those in the historic rehabilitation and LIHTC programs. Current guidance could be overly burdensome for many because it creates two different 24-month periods for meeting the threshold requirement, depending on whether a projects cost is financed directly or funded through take-out financing, said the organization, which was launched by Novogradac & Co., LLP, an accounting firm, in 2006.
The group recommended that the threshold be met at any time during any 24-month period that the qualified low-income community investment is made.