| (i) Feasibility Conclusion. A Development will be characterized
as infeasible if paragraph (1) or (2) of this subsection applies.
The Development will be characterized as infeasible if one or more
of paragraphs (3) or (4) of this subsection, applies unless paragraph
(5)(B) of this subsection also applies.
(1) Gross Capture Rate, AMGI Band Capture Rates, and
Individual Unit Capture Rate. The method for determining capture rates
for a Development is defined in §11.303 of this chapter (relating
to Market Analysis Rules and Guidelines). The Underwriter will verify
the conclusions of the capture rates and may, at their discretion,
use independently acquired demographic data to calculate demand and
may make a determination of the capture rates based upon an analysis
of the Sub-market. The Development:
(A) Is characterized as an Elderly Development and
the Gross Capture Rate or any AMGI bad capture rate exceeds 10%; or
(B) Is outside a Rural Area and targets the general
population, and the Gross Capture Rate or any AMGI band capture rate
exceeds 10% (or 15% for Tax-Exempt Bond Developments located in an
MSA (as defined in the HTC Site Demographics Characteristics Report)
with a population greater than one million if the average physical
occupancy is 92.5% or greater for all stabilized affordable housing
developments located within a 20 minute drive time, as supported by
the Market Analyst, from the subject Development); or
(C) Is in a Rural Area and targets the general population,
and:
(i) contains Housing Tax Credit Units of 120 or less,
and the Gross Capture Rate or any AMGI band capture rate exceeds 30%;
or
(ii) contains more than 120 Housing Tax Credit Units,
and the Gross Capture Rate or any AMGI band capture rate exceeds 10%;
or
(D) Is Supportive Housing and the Gross Capture Rate
or any AMGI band capture rate exceeds 30%; or
(E) Has an Individual Unit Capture Rate for any Unit
Type greater than 65%; and
(F) Developments meeting the requirements of subparagraph
(A), (B), (C), (D) or (E) of this paragraph may avoid being characterized
as infeasible if clause (i) or (ii) of this subparagraph apply:
(i) Replacement Housing. The proposed Development is
comprised of affordable housing which replaces previously existing
affordable housing within the Primary Market Area as defined in §11.303
of this chapter (relating to Market Analysis Rules and Guidelines)
on a Unit for Unit basis, and gives the displaced tenants of the previously
existing affordable housing a leasing preference; or
(ii) Existing Housing. The proposed Development is
comprised of existing affordable housing, whether defined by an existing
land use and rent restriction agreement or if the subject rents are
at or below 50% AMGI rents, which is at least 50% occupied and gives
displaced existing tenants a leasing preference as stated in a relocation
plan.
(2) Deferred Developer Fee. Applicants requesting an
allocation of tax credits where the estimated Deferred Developer Fee,
based on the underwritten capitalization structure, is not repayable
from Cash Flow within the first 15 years of the long term pro forma
as described in subsection (d)(5) of this section.
(3) Initial Feasibility.
(A) Except when underwritten at cost certification,
the first year stabilized pro forma operating expense divided by the
first year stabilized pro forma Effective Gross Income is greater
than 68% for Rural Developments 36 Units or less, and 65% for all
other Developments.
(B) The first year DCR is below 1.15 (1.00 for USDA
Developments).
(4) Long Term Feasibility. The Long Term Pro forma
reflects:
(A) A Debt Coverage Ratio below 1.15 at any time during
years two through fifteen; or
(B) Negative Cash Flow at any time throughout the term
of a Direct Loan, or at any time during years two through fifteen
for applications that do not include a request for a Direct Loan.
(5) Exceptions. The infeasibility conclusions will
not apply if:
(A) The Executive Director of the Department finds
that documentation submitted by the Applicant at the request of the
Underwriter will support unique circumstances that will provide mitigation.
(B) Developments not meeting the requirements of one
or more of paragraphs (3)(A) or (4) of this subsection will be re-characterized
as feasible if one or more of clauses (i) - (v) of this subparagraph
apply. A Development financed with a Direct Loan, including a Supportive
Housing Development, will not be re-characterized as feasible with
respect to paragraph (4)(B) of this subsection. The Development:
(i) will receive Project-based Section 8 Rental Assistance
or the HUD Rental Assistance Demonstration Program for at least 50%
of the Units and a firm commitment, with terms including Contract
Rent and number of Units, is submitted at Application;
(ii) will receive rental assistance for at least 50%
of the Units in association with USDA financing;
(iii) will be characterized as public housing as defined
by HUD for at least 50% of the Units;
(iv) meets the requirements under §11.1(d)(124)(E)(i)
of this chapter (relating to the Definition of Supportive Housing);
or
(v) has other long term project based restrictions
on rents for at least 50% of the Units that allow rents to increase
based upon expenses and the Applicant's proposed rents are at least
10% lower than both the Net Program Rent and Market Rent.
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