As affordable housing projects continue to be at the forefront of residential construction starts, developers, investors, and lenders may be pursuing projects that they don’t fully understand. Certain hot-topic items to be aware of are addressed below:
One of the most important issues for affordable housing is schedule. The majority of affordable housing projects have a Placed-In-Service (PIS) date that must be achieved in order to obtain any tax credits the project is eligible for. The PIS date does not imply the project is 100% complete; rather, a portion of the project must be occupiable by the end user. In the case of a multifamily project, one residential building, or even a portion of the residential building, must have a Certificate of Occupancy. Therefore, the design team and construction team need to be aware when they are initially phasing the project, and when construction delays occur, how best to achieve this PIS date. Typically, a building adjacent to the street and the clubhouse is the best choice for first building completion (after the Clubhouse, if applicable).
Another issue to be aware of with affordable housing is the amenities that are required per the tax credit application (TCA). Often the TCA is compiled many months before design is completed and construction commences. Therefore, due to municipality comments, value engineering, or a variety of other reasons, certain amenities may be erroneously removed and/or modified as part of the final construction documents. It is important for all parties to be aware of what unit amenities and common area amenities are included in the TCA. If modifications need to be made, early communication is essential as removal of these items may jeopardize certain easily achievable tax credits.
The affordable housing sector is an expanding section of multifamily and single family development, and is important through all construction cycles. It is critical that certain key issues be kept in mind as the project team moves forward.