MICHIGAN

By Jerry Ascierto

LANSING—The Michigan State Housing Development Authority (MSHDA) has overhauled its 2008 qualified allocation plan (QAP), proposing significant changes that include mandating green and sustainable design features, introducing new holdback criteria, and changing the way income levels are calculated.

A host of green threshold requirements, mandated in the 2008 QAP for the first time, differ according to development type.

Developers working on new construction projects must locate project sites within a quarter mile of at least four neighborhood shops, services, or facilities; orient the building to make the greatest use of passive solar heating and cooling; and install water-conserving bathroom and kitchen fixtures, among many other provisions.

Developers working on acquisitionrehabilitation deals must install Energy Star-labeled appliances; install daylight sensors or timers on all outdoor lighting; and use interior paints, primers, adhesives, and sealants that contain low or no volatile organic compounds (VOCs), among many other provisions. VOCs are chemical compounds such as methane that vaporize over time and enter the atmosphere.

All of the new green criteria for acquisition-rehabilitation also apply to new construction, but many of the new construction criteria are specific to that project type.

MSHDA also has changed some of its other threshold requirements. All projects receiving tax credits must now give leasing priority on 10 percent of all units to supportive housing tenants.

Another significant change in threshold requirements concerns the workforce employed by the applicant and contractor. Those applying for LIHTCs, and their general contractors, are now required to commit to working with "disadvantaged businesses" such as those owned and controlled by minorities and women, as well as to employ local workforces.

Other new threshold requirements include prevailing wage requirements; health care coverage requirements; and employment of workers involved in the federal earned income tax credit program.

Previous QAPs featured holdbacks for preservation, small projects, special needs, and projects that participated in the state’s "Cool Cities" program.

The revamped 2008 QAP eliminates those and provides for five new holdbacks:

• Projects in the cities of Detroit, Hamtramck, and Highland Park (50 percent);

• Projects in poverty-distressed cities (15 percent);

• Small communities and rural housing (10 percent);

• Supportive housing/housing for persons with special needs (15 percent); and

• Preservation projects (10 percent).

All applications for LIHTCs must elect one holdback category.

The way that income targeting is calculated has changed as well. In the 2008 QAP, income targeting will be based on area median incomes (AMI), as opposed to an overall state median income figure.

Underwriting standards have also changed. MSHDA has increased the minimum hard construction cost for rehabilitation projects from $5,000 to $10,000. The change was made “to require adequate and meaningful rehab,” according to MSHDA.

Additionally, MSHDA staff will begin visiting some development sites to ensure that all requirements outlined in the application and QAP have been met.

MSHDA reserved $19.8 million in 9 percent tax credits in 2007. Demand outpaced supply by more than 5 to 1, with developers requesting $104.9 million. In all, 52 projects received 2007 reservations, good for 2,356 tax credit units.

The small projects holdback (24 units or fewer) was the most oversubscribed setaside category, with more than nine times more credits requested than were available.

New construction projects won $10.1 million, while acquisition-rehabilitation developments scored about $9 million. Projects serving the homeless were awarded more than $2.7 million, while those serving the physically or mentally disabled won more than $2.5 million.

A large share of tax credit units, more than 40 percent, targeted those earning 60 percent of the AMI or less, another 18 percent went to those targeting 40 percent of the AMI, and almost 17 percent went to units serving those earning up to 30 percent of the AMI.

The median tax credit award was $329,375 and the median project size was 39 units.

Tax-exempt bonds

Michigan expects to have approximately $900 million in tax-exempt private- activity bond financing in 2008, though it hadn’t determined the amount set aside for rental housing as of early November. In 2007, the state allocated $138.7 million in tax-exempt bond financing to multifamily developments. In all, it funded 41 projects totaling 3,597 units in 2007, using a combination of 2006 and 2007 volume cap.

2008 LIHTC PROGRAM: