[Note: For more recent information about Summit’s proposal for Lyons Valley Park, see this column.]
Some Lyons Valley Park homeowners have posted on social media and in Lyons Recorder comments pages expressing concerns about oversight of the affordable rental homes that Summit Housing Groups proposes for Lyons Valley Park, how and when Summit could sell the buildings, how long the rentals must be affordable to households of specific incomes, and specific requirements for the renters themselves.
We know for sure that the federal funding sources that Summit Housing Group plans to use for homes in Lyons Valley Park come with several layers of requirements and oversight that regulate long-term affordability. Summit was approved for both Low-Income Housing Tax Credits (LIHTC) and the Community Development Block Grants – Disaster Recovery (CDBG-DR) funding in 2019.
To find out the specifics, I did some research on the LIHTC requirements, administered here in Colorado by the Colorado Housing Finance Authority (CHFA). The oversight and compliance for LIHTC is so complex that I can only focus on it in this week’s column. I’ll have more information in the future about any additional requirements for CDBG-DR funding.
Required reporting for LIHTC
According to CHFA’s LIHTC Manual, the U.S. Congress enacted the LIHTC program through the Tax Reform Act of 1986, and the U.S. Department of the Treasury is responsible for the administration of the LIHTC program. The LIHTC program is governed by Section 42 of the Internal Revenue Code. The introduction further explains, “Under the Code, each state is required to designate a ‘housing credit agency’ to allocate the credits. The State of Colorado has designated CHFA to allocate tax credits and monitor compliance.”
CHFA compliance is extensive. The LIHTC funding has many regulations listed on the CHFA page. The forms page list is long. Annual submission forms include Owner Certification of Continuing Program Compliance. There are more than 25 Resident Certification/Verification Forms, and residents must report household income and household assets.
I also learned from talking with an investor in LIHTC projects that investor committees do extensive review to keep their risk low. Loan holders also have oversight.
Requirements about selling LIHTC properties and long-term affordability of the homes
Properties financed using the LIHTC must maintain affordability for 30 years. The first 15 years (the “compliance” period) are monitored by the IRS, and the second 15 years (the “extended use” period) are monitored by CHFA. Those two periods each have a compliance manual on the CHFA website.
During those 30 years, a property owner that used the LIHTC program cannot sell unless the buyer will continue to operate under the same rules and regulations and CHFA oversight. To avoid loss or recapture of tax credits, if the owners would need to find a buyer expected to continue to operate the property as a qualified low-income building for the remainder of the compliance and extended use period. Owners must be in compliance with the LIHTC program requirements at the time of the proposed transfer, and transfer fees may be required. CHFA’s written consent is required prior to any transfer of ownership. Owners are advised to review the Land Use Restriction Agreement (LURA) specific to each property for additional requirements.
After that period, there are specific rules about how the units could be converted to market-rate, with an additional several years of protection of existing tenants. Owners are able to reinvest tax credits.
Summit has a history of keeping the ownership of Summit properties, managed by its own property management company.
Requirements for tenants in LIHTC properties
Affordability required by LIHTC is affordable rents for households at 30 percent to 60 percent of the area median income (varies on household size). According to the LIHTC compliance manual, a low-income unit is rent-restricted and occupied by a household who qualifies under the applicable set-aside restriction of 50 percent or 60 percent of the area median income (AMI).
To understand the AMI for Boulder County and what 60 percent means for various household sizes, see 2019 Colorado County Income and Rent Tables. Specific requirements for each property are detailed in the property’s regulatory agreement or LURA.
The income of tenants is evaluated every year as part of a lease, which means that households with income above the limits wouldn’t be able to renew the lease and would have to move out. This is the required affordability that many Lyons neighbors have expressed concern about–that the rentals would remain open for households at 60 percent of the area median income.
Residents must report household income and household assets, and a final tax document is vetted for each tenant as part of a much larger review.
Next step for Summit’s development plan in the Town of Lyons: March 10 public hearing
The March 10 public hearing notice for Summit Housing Group’s development plan before the Lyons Planning and Community Development Commission is listed on the town website public notices page. This development plan process is for the 21 units of multifamily housing, called Lyons Valley Townhomes, proposed for Tract A of Filing No. 8 of the Lyons Valley Park subdivision. (The 19 single-family homes that Summit also plans to build are on lots already platted and entitled, requiring only standard building permits like elsewhere in town.)
The public hearing for this development plan is both open to the public to attend and includes time for public comment. The meeting is scheduled for 7 p.m. at Lyons Town Hall. Development plan documents from Summit are also posted on the town website.