Low Income Housing Tax Credit Program Training

October 4, 2017

• Introductions

• Agency Updates

• Energy Program

• Overview of LIHTC Program

• Design and Construction

• Physical Inspections – UPCS vs. REAC

• File Audits, file set up and maintenance

• Determining Income and Assets

• New Policy – Asset Verification

• WTC and HUD Data Collection

• Questions

Agenda

Agency Updates

Rhode Island Housing

Reserve for Brigid’s slides

Energy Program

• Application

• Development/Construction

• Allocation

• Initial Certification

• 10-year Credit Period and 15-year Compliance Period

• Extended Use Period

Overview of the LIHTC Life Cycle

Design and Construction staff, Who We Are:

• 8-member technical assistance department

• Diversely skilled team

• 4 licensed contractors

• 2 with architectural backgrounds

• 1 with engineering background

• 1 building envelope & energy efficiency expert

• Certified building inspectors

• Construction accounting and administration experts

• Over 30 years experience

Design and Construction

Who we are (cont.):

• Certified lead contractors and/or inspectors

• Serve on legislative sub committees on sustainable development, energy initiatives, building and fire code, environmental regulatory changes, etc.

• Receive continuing education and certificates in energy code, environmental, home inspections, construction estimating, building science, renewal energy, capital needs assessments, etc.

• Trained in Fair Housing, Section 504 and ADA

Design and Construction (cont.)

Development Types:

• New Production of LIHTC, HOME Program, BHRI, ARP and other housing programs

• Preservation of Housing through 4% Tax Credits, Federal Financing Bank (FFB), Housing Trust Funds (HTF), etc.

• Large Scale Capital Improvement Construction Projects financed through development reserves (i.e. roofs, HVAC, windows, etc.)

Design and Construction (cont.)

What we do:

• Compliance monitoring for Affirmative Action, Davis Bacon and Section 3

• Conduct all loan closing due diligence through design, construction and engineering

• Construction quality control

• Develop and implement Policies, Procedures and Design and Construction Guidelines

• Perform environmental reviews

Design and Construction (cont.)

What we do (cont.):

• Design guidelines that cover 16 CSI divisions of construction

• Monitor all phases of construction from site excavation to painting/cleaning and operations and maintenance.

• Perform up-front cost reasonableness analysis, analyze capital needs assessments (CNA) and construction bids.

• Process requisitions, approve change orders, perform punch list inspections, collect project close-out and tenant occupancy documentation, etc.

Design and Construction (cont.)

What we do (cont.):

• Promote Universal Design, Defensible Space, Energy efficiency, healthy Homes, Sustainable Development, etc.

• Provide expert advisement and guidance to: development officers, ancillary underwriters, financial staff, and asset management and compliance staff

• Review contracts

• Track code and regulatory changes & periodically update requirements

Design and Construction (cont.)

What you should do:

• Get involved with construction process

• Review plans, specs or cut sheets to ensure your designers are specifying quality products

• Conduct a pre-construction coordination meeting to ensure that contractor fully understands work hours, staging areas/use of site, temporary utilities, access to units, furniture moves, project safety, etc.

Design and Construction (cont.)

What you should do (cont.):

• Attend construction meetings to understand potential issues and offer feedback on installed products (warranty issues are typically noticed during construction or shortly thereafter)

• Make certain maintenance staff is properly trained to monitor and maintain new equipment (new HE equipment can be high tech)

Design and Construction (cont.)

What you should do (cont.):

• Retain HVAC & HW start-up and commissioning reports on site

• Retain copies of As Built Drawings, As Built Surveys and Operation and Maintenance Manuals on site

• Retain PTO’s and CO’s on site• Product knowledge• Understand your guarantee and product

warrantees and expiration dates• Communication is key when problems arise –

owner/agent → RI Housing

Design and Construction (cont.)

Recommendations:

• Training for maintenance staff

• Warranties – keep at fingertips

• Product knowledge – windows, floors, doors, HVAC systems, etc.

• Vendor/Mfg. presentations

• Tenant education

• Communication – owner/agent → RI Housing

Design and Construction (cont.)

Questions?

Design and Construction (cont.)

Assistant Director/Design & Construction

Tony A'Vant: tavant@rihousing.com, 401-457-1103

Manager Construction

Denise Correy: dcorrey@rihousing.com, 401-457-1217

Design & Construction Specialists

Dan Healey: dhealey@rihousing.com, 401-457-1195

Molly Lee: mlee@rihousing.com, 401-457-1259

Harry Oakley: hoakley@rihousing.com, 401-457-1284

Paul Sheehan: psheehan@rihousing.com, 401-277-1553

Rich Barrett: rbarrett@rihousing.com, 401-457-1116

Joe Cabral III: jcabral@rihousing.com, 401-457-1243

Design & Construction Contacts

• Treas. Reg. §1.42-5(c)(2)(ii)(B): once every 3 years state agencies conduct on-site inspections of all buildings, common areas, grounds and percentage of units in the project

• LIHTC projects must be safe, decent, sanitary, in good repair, suitable for occupancy

• Uniform Physical Conditions Standards (UPCS) is the inspection standard

• UPCS = REAC

▪ RI Housing uses discretion

▪ InspectCheck software used

Inspection Requirements

RI Housing’s Four Types of Inspections

1. REAC

2. REAC under the Pilot program

3. UPCS

4. Mortgagee

Types of Inspections

• Standards are applicable to all properties subject to UPCS physical inspections.

• Inferior repairs – not acceptable

• All repairs must be made in good and workmanlike manner with materials suitable for the purpose and defect free.

HUD Notice Industry Standard Repairs

• Cracks in Brick Wall: Tuck-pointed using mortar = correct; Caulking is not.

• Drywall Repair: Sheetrock with mud and/or tape = correct; Covering hole or damaged drywall with plywood or laminate is not.

• Wooden Door Repair: Wood or wood veneer = correct; Sheetrock mud or plywood is not.

• Downspouts: Same materials, shape and design = correct; Plastic or PVC piping is not.

https://www.us-hc.com/images/pdfs/IndustryStandardNotice2016.pdf

HUD Notice Industry Standard Repairs

REAC

• The Uniform Physical Conditions Standards (UPCS) are the standards followed for REAC (Real Estate Assessment Center) inspections.

• Performed by 3rd party HUD certified inspectors

• UPCS standards

• Use Rapid 4.0 software - Record and Process Inspection Data (RAPID) inspection software

• 8823s may be issued

https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products/prodpass/dcd4.0

Types of Inspections

REAC under the Pilot program - a.k.a. InteragencyPhysical Inspection Alignment Initiative

• Initiative between IRS, HUD and USDA

• Performed by 3rd party HUD certified inspectors including RI Housing Compliance staff who are HUD certified

• UPCS standards

• Use Rapid 4.0 software - Record and Process Inspection Data (RAPID) inspection software

• 8823s may be issued

https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products/prodpass/dcd4.0

Types of Inspections (cont.)

UPCS – Uniform Physical Condition Standards

• UPCS Protocol

• Use InspectCheck software

• Five required inspectable areas

• At least 20% of units, all buildings, building systems, common areas, and grounds

• Market Ready and Vacant units over 30 days

• Conducted by RI Housing Compliance Specialist

• 8823s may be issued

Types of Inspections (cont.)

Mortgagee• Property is in good standing and well maintained

• UPCS protocol

• Sampling of all buildings, building systems, common areas, grounds and vacant units.

• All health and safety items will be brought to attention of management; 24 hours to correct such condition

• Conducted by RI Housing Compliance Specialist

• 8823s may be issued

Types of Inspections (cont.)

Five Areas Required Under UPCS:

1. Site

2. Building Exterior

3. Building Systems

4. Common Areas

5. Units

Inspectable Areas

SITE

• Fencing and Gates

• Grounds

• Mailboxes/Project Signs

• Market Appeal

• Parking Lots/ Driveways/Roads

• Play Areas and Equipment

• Refuse Disposal

• Retaining Walls

• Storm Drainage

• Walkways/Steps

Inspectable Areas (cont.)

• Doors

• FHEO/Uniform Federal Accessibility Standards (UFAS)

• Fire Escapes

• Foundations

• Lighting

• Roofs

• Walls

• Windows

Inspectable Areas (cont.)

BUILDING EXTERIOR

BUILDING SYSTEMS

• Domestic Water

• Electrical System

• Elevators

• Emergency Power

• Fire Protection

• HVAC

• Roof Exhaust System

• Sanitary System

Inspectable Areas (cont.)

COMMON AREAS

• Basement/Garage/Carport

• Closet/Utility/Mechanical

• Community Room

• Day Care

• Halls/Corridors/Stairs

• Kitchen

• Laundry Room

• Lobby

• Office

• Other community spaces

• Patio/Porch/Balcony

• Pools and Related Structures

• Restrooms/Pool Structures

• Storage

• Trash Collection Areas

Inspectable Areas (cont.)

UNITS

• Bathroom

• Call-for-Aid

• Ceiling

• Doors

• Electrical System

• Floors

• Hot Water Heater

• HVAC System

• Kitchen

• Laundry Area

• Lighting

• Outlets/Switches

• Patio/Porch/Balcony

• Smoke Detector

• Stairs

• Walls

• Windows

Inspectable Areas (cont.)

HEALTH AND SAFETY ITEMS

• Air Quality

• Electrical Hazards

• Elevator

• Emergency/Fire Exits

• Flammable Materials

• Garbage and Debris

• Hazards

• Infestation

Health and Safety

Exigent Health & Safety (EHS)

• Risk of potential harm or death to residents or others

▪ Air Quality

▪ Blocked Egress

▪ Improperly stored flammable materials

Health & Safety (H&S)

• Any hazardous condition that poses threat to health and safety of residents and others

▪ Sharp edges

▪ Infestation

▪ Trip hazards

Health and Safety (cont.)

Blocked EgressIf there is only one window in a bedroom, it must be a viable

egress in case of emergency. Large furniture in front of window inhibits an emergency exit.

Common Findings (cont.)

Electrical HazardRepairs are not Industry Standard, caulking was used

to fill gap.

Common Findings (cont.)

Sprinkler HeadEscutcheon missing, replaced with a pipe trim ring,

hole in ceiling tile and paint on ceiling.

Common Findings (cont.)

Missing KnockoutElectrical panels and junction boxes have additional knock-outs in the event further work is needed; however, an open knock-

out is a LT health and safety concern.

Common Findings (cont.)

Call-for-AidMust be accessible, must be long enough to reach baseboard, cannot be blocked by furniture, must function as designed:

• Bell rings• Annunciator on panel tones and/or illuminates • Light above apartment door illuminates

Common Findings (cont.)

Broken glass – sharp objectCan be found in shrubs, play areas, parking areas or

anywhere on grounds.

Common Findings (cont.)

Tripping Hazard

Cords running across floors

Common Findings (cont.)

Broken lifting/heaving walkway-

Tripping Hazard

Common Findings (cont.)

REAC – have available:• Site Map

• Building Information▪ Units

▪ Floors

• Square footage of parking lots/driveways and walkways for inspector

• Current Rent Roll or Occupancy Report▪ Bedroom Size

▪ Vacant Units

Helpful Hints for Preparation

REAC - have available (cont.):• Boiler certificates• Elevator certificates• Lead-Safe documentation• Evidence of Fire Alarm Testing • Resident notification letter

▪ Should state inspection may last more than 1 day▪ Do not set specific completion time for unit inspections▪ Check for grease/oil in the oven▪ Check egresses – doors and windows▪ Check pull cords

Helpful Hints for Preparation (cont.)

For UPCS:• If master key system, have keys ready• Site map• Have staff ready to walk with RI Housing staff• Notify tenants

▪ Do not state end time for unit inspections▪ Check for grease/oil in the oven▪ Check egresses – doors and windows▪ Check pull cords

Helpful Hints for Preparation (cont.)

• Health and safety (EH&S and H&S) are written up immediately

• 8823s are issued for all EH&S Health and safety for REAC and UPCS

• Must be corrected within 12, 24 or 48 hours

• Proof of correction must be submitted

Remedies for Non-Compliance

UPCS findings – 30 days to provide proof of correction

• Proof of correction includes signed work orders

• If correction must be delayed, provide proof, estimated commencement and completion dates.

• Request extension if unable to meet 30-day deadline.

Remedies for Non-Compliance

• IRS 8823 Guidehttps://www.irs.gov/pub/irs-utl/lihc-form8823guide.pdf

• HUD REAC Compilation Bulletinhttps://www.us-hc.com/images/pdfs/HUD_REAC_Comp_Bulletin_4.V3.pdf

• UPCS Codehttps://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products/pass/pass_insp_rpv23

Available Resources

• Best Practices

• Consistency

• LIHTC Audits

▪ All files available

▪ Lease and addendum(s)

▪ Purge

LIHTC Tenant Files

• TIC

• Worksheet/calculation tapes

• Initial TIC and backup documentation

• Lease Agreement – (1 year term minimum)

• RI Housing’s LIHTC Lease Addendum (10/7/14 revision)

• Unit inspection report/form

• Consent for release of information

• Student Status Affidavit

• 3rd party verification from educational institution

LIHTC Tenant Files (cont.)

• Recurring Gifts form

• 3rd party written Verification of Income

• Verification of Assets *** new policy

• Documentation showing failed attempts for third party verification.

• Clarification notes (if applicable)

• Certification of No Income

• Asset Certification form (New rev.# 2 eff. 10/1/15)

• Child Support Affidavit - Notarized

• Alimony Affidavit – Notarized

LIHTC Tenant Files (cont.)

• Rental application

• Recertification questionnaire

• Photo ID for each adult member

• Birth Certificate for each household member

• Social Security card for each household member

• Race and Ethnicity documentation

• HUD “Residents Rights & Responsibilities

• Lead Hazard Information Pamphlet and the Disclosure form if applicable. (Acknowledgement of receipt of Pamphlet is acceptable)

LIHTC Tenant Files (cont.)

• Unable to obtain 3rd party verification of income?

▪ Use pay-stubs - gross amount on each

• Apply anticipated raise percentage to overtime income calculation

• Compare paystub method to 3rd party verification and use highest

• Is Social Security temporarily reduced to repay an overpayment? When does repayment period end?

Determining Income and Assets

• Use “cash value”

• Cash value = market value less reasonable expenses that would be incurred in selling or converting asset to cash

• Reasonable expenses include but are not limited to the following:

1. Penalties for premature withdrawal

2. Broker and legal fees

3. Settlement costs for real estate transactions* From the HUD 4350.3 chapter 5

Determining Income & Assets (cont.)

• Determine ownership of account

• For real estate – deed, appraisal, comparables from RI Living.com, Zillow.com, legal documentation, foreclosure paperwork, etc.

▪ DO NOT USE THE TAX ASSESSOR’S VALUE

• For joint bank accounts – financial institution will disclose number of account owners

• For investment accounts – is the person vested, do they have access to the account?

Determining Income & Assets (cont.)

If the total assets for a household are $5,000 or less, the tenant may satisfy the asset verification requirement by signing a statement attesting to such fact.*

• The statement must be notarized

• Ensure Section 8 requirements are met if blended site

*Rev. Proc. 94-65, 1994-2 C.B. 798

New Policy

Assets < $5000 Self Certification

POP QUIZ

• Mandatory

• Authorized users only

• Semi annual authorization

• LIHTC tenant data collection for HUD

• Non compliance = potential 8823

Web Tenant Compliance (WTC)

• WTC Demonstration

WTC

Questions?

Thank you!

Assistant Director, Asset Management/ComplianceMichael DiChiaro: mdichiaro@rihousing.com, 401-457-1274

Manager Multifamily Workout & Quality Control Susan Halloran: shalloran@rihousing.com, 401- 450-1339

Rental Compliance/Training CoordinatorKathleen Millerick: kmillerick@rihousing.com, 401-457-1241

Multifamily Compliance SupervisorJill Rioles: jrioles@rihousing.com, 401- 450-1307

Contacts

LIHTC Program Multifamily Compliance Specialists:Glen Turner: gturner@rihousing.com, 401-457-1154Jill Rioles: jrioles@rihousing.com, 401-450-1307Craig Scorpio: cscorpio@rihousing.com, 401-450-1326Lenore Coughlin: lcoughlin@rihousing.com, 401-457-1258

Jamie Wolcott: jwolcott@rihousing.com, 401-450-1343

HOME Program Compliance Specialist:Brittany Toomey: btoomey@rihousing.com, 401-429-1455

Multifamily Asset Management:

Financial Analyst:

Kate Mashburn: kmashburn@rihousing.com, 401-450 -1351

Contacts