2018 Underwriting Outlook Underwriting in The Absence of State LIHTC - - PowerPoint PPT Presentation

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Oct 16, 2022 399 likes •531 views

2018 Underwriting Outlook Underwriting in The Absence of State LIHTC - Key Areas of Crit ical Focus Site Characteristics & Eligibility of Federal Funds Rural vs. Non-Rural Considerations Cost Containment Development Size

SLIDE 1

2018 Underwriting Outlook

SLIDE 2

Underwriting in The Absence of State LIHTC

Key Areas of Crit ical Focus
Site Characteristics & Eligibility of Federal Funds
Rural vs. Non-Rural Considerations
Cost Containment
Development Size and Credit Request
Tax Credit Price
Leveraging with Non MHDC Gap Funds
Partnering with Non-profit Service Providers
Financing with Tax-Exempt Bonds – With and

without MHDC administered funds

SLIDE 3

S it e Charact erist ics & Eligibilit y

f Federal Funds
More flexibility of MHDC resources during initial

underwriting than in previous rounds

Site review and eligibility for federal gap funds
Option Agreement vs. Contract requirement for all

applications

SLIDE 4

Rural vs. Non-Rural Considerat ions

The need for gap funds even at maximum tax credit

eligibility

Need for gap funds expected to be more pronounced in

the outstate region

Geographic Region allocation goals

SLIDE 5

Cost Cont ainment

Building quality, safe, and decent affordable housing

with limited resources

Effects of 2017 natural disasters on construction costs
Elimination of Prevailing Wage Rates for projects with

less than 12 HOME units

Focus on individual budget line items

SLIDE 6

Development S ize and Credit Request

Underwriting a proposal using the maximum eligible tax

credit amount

“Larger” developments will potentially require “larger”

amounts of federal credits and gap funds

Limited amount of federal credits and gap funding to

spread around

SLIDE 7

Tax Credit Price

Reduction of federal corporate tax rate to 21% versus

25%

Sensitivity of minor change in tax credit pricing to

development’s feasibility

Need to “fight” for a competitive tax credit price

SLIDE 8

Leveraging wit h Non MHDC Gap Funds

Could be significant in the financial feasibility &

viability of some applications

SLIDE 9

Part nering wit h Non-profit S ervice Providers

Free services and the operating budget

▫ Will play a major role in the financial feasibility and viability of some applications

Ability to take on hard debt

SLIDE 10

Financing wit h Tax-Exempt Bonds – Wit h and wit hout MHDC administ ered funds

Non-rolling 4% applications will be competing with 9%

applications for limited gap funds

Amount of request in MHDC soft debt for Tax Exempt

Bond financing

Rolling 4% applications will be received through August 1
Same underwriting standards apply to rolling 4%