New Developments, QAPs in 2018

4 min read

Many state housing finance agencies are beginning work to tweak or, in some cases completely overhaul, their QAPs over the next few months. Adjusting to the post-tax reform credit and construction pricing environment will be a part of their challenge. States also are scrutinizing their policies to see how they stack up against the National Council of State Housing Agency’s recently updated Recommended Practices in Housing Credit Administration. There are several areas in particular that I expect will be hot topics for conversation and debate in the coming QAPs.

One long simmering concern in the development community is how QAPs should balance mission-oriented public policy goals (e.g. encouraging deeper income targeting, green building or serviced-enriched housing) with the rising cost realities on the ground and the need for greater housing production. This is not an easy puzzle to solve. As federal resources continue to shrink, policy makers are forced to rely on the LIHTC to alleviate more and more community development challenges. This might be a reasonable strategy if LIHTC allocations were dramatically expanded, but at current levels it is being stretched to its limit. In the absence of new resources, perhaps the policy pendulum needs to swing a little bit back towards a simpler, lower cost, lower frills housing product that can leverage more debt and spreads the LIHTC across a greater number of units.

The solution many states are considering is additional caps per unit and/or per development cost caps on allocations going forward. I believe that, as with any limited public resource, there need to be checks in place to ensure reasonable development costs. The long-term health of the program is threatened if Congress or the public perceive that affordable housing costs are excessive. So many aspects of the program administration drive costs up, including incentives to site projects in high-cost, transit-oriented neighborhoods of opportunity, high-performance building materials and systems that far exceed code, as well as amenities and services that have to be capitalized. Per unit or project caps are not a bad thing, but they must better reflect realities on the ground and consider life-cycles. We need this housing to last and don’t want to be penny-wise and pound-foolish.

Another topic that always raises tension between housing finance agencies and developers is restrictions on developer, consultant and other related party fees. Of course, HFAs should enact appropriate developer, builder and consulting fees. However, I believe NCSHA’s amended recommended practice is overly proscriptive and, in particular, restricts a state’s ability to nimbly address the differing needs of the nine percent and four percent programs.

Adequate developer fees are vital to the success of affordable housing development. An adequate developer fee is what attracts quality developers to this industry. Without appropriate incentives, the industry’s quality developers will leave, resulting in lower-caliber developments. Since these deals by design do not generate cash flow, a developer fee is a necessary component of the public-private partnership which makes the LIHTC program so successful. There is a great deal of uncertainty and risk in affordable housing development, combined with long timelines. The developer fee compensates developers for the potential risk of not receiving any compensation for as long as four to six years of pre-development work and overhead. It is my opinion that more challenging transactions (and there are many criteria states may consider in defining “challenging”) should benefit from a higher developer fee and the QAPs should preserve flexibility in their developer fee policies to the greatest extent.

These are multifaceted and complicated issues to navigate, yet navigate them we must. NH&RA and Tax Credit Advisor are excited to host more reasonable discourse at our events and in the pages of this publication in the months to come to find balanced solutions that meet the needs of advocates, developers and agencies alike.

Thom joined National Housing & Rehabilitation Association (NH&RA) in 2004 and currently serves as its as Executive Vice-President and Executive Director. NH&RA is a national trade association and peer-network for affordable housing and tax credit developers and related professionals including: investors, lenders, public agencies and professional advisers. Thom directs the association’s day-to-day operations including legislative and regulatory advocacy, committee activities, conferences and events, publications, financial management and strategic planning. Thom also serves as the Executive Director of the Tennessee Developers Council, a state-wide trade association for affordable housing developers and professionals active in Tennessee. In 2013 he spearheaded the launch of NH&RA's Preservation through Energy Efficiency Project, a major educational initiative supported by the John D. and Catherine T. MacArthur Foundation. Thom also serves on the Board of Directors for International Center for Appropriate & Sustainable Technology (iCAST) as well as the Advisory Board for its ResourceSmart program, a turn-key, cost-effective, green rehab provider for multifamily affordable and market-rate housing communities and nonprofit facilities. Thom is a frequent speaker at affordable housing, sustainable development and tax credit industry events and has been published in a variety of industry journals including Tax Credit Advisor, Independent Banker, and the Novogradac Journal of Tax Credit Housing. Thom also serves as the Associate Publisher of Tax Credit Advisor, a monthly magazine for tax credit and affordable housing professionals and is an Executive Vice-President at Dworbell Inc., a boutique association management and communications firm in Washington, DC. Thom was previously employed at a national lobbying firm focusing on financial services and technology issues. Prior to moving to Washington, Thom worked in media relations in the New York State Assembly and as a research assistant for New Hampshire Governor Jeanne Shaheen. Thom graduated Magna Cum Laude from Tufts University with a double major in Political Science and History.