On August 6th, Massachusetts Governor Maura Healey signed into the law House Bill No. 4977, known as The Affordable Homes Act (the “Act”), considered to be the most ambitious housing investment legislation in the Commonwealth’s history. The Act authorizes $5.16 billion in spending over the next five years along with 49 policy initiatives to address rising housing costs brought on by the combination of high demand with limited supply. In addition to the substantial investment in modernizing the state’s housing system, the Act and its related policy changes will lessen impediments to build accessory dwelling units, fortify programs supporting first-time homebuyers and will incentivize building more housing for low to moderate-income residents.
In an attempt to modernize the state’s housing system, the Act, among other things, authorizes: (i) $800 million into the Affordable Housing Trust Fund, which assists in the creation and preservation of affordable housing for households earning less than 100% of area medium income (“AMI”); (ii) $425 million to support new construction and rehabilitation projects through the Housing Stabilization and Investment Trust Fund; and (iii) $100 million for the Middle-Income Housing Fund (administered by the Massachusetts Housing Finance Agency) to fund housing developments for households earning less than 120% of AMI.
In addition to the substantial level of spending authorizations, the Act amends Mass. Gen. Laws 40A § 3 to allow the building of accessory dwelling units under 900 square feet on single-family lots without local zoning approval. Commonly known as “In-Law Apartments,” accessory dwelling units can be attached or detached from a single-family home. They often take shape as a basement or attic conversion, a cottage in a backyard or an addition to a home. The statutory change authorized by the Act replaces the patchwork of inconsistent zoning regulations across the Commonwealth with a uniform law allowing single-family homeowners to construct a small unit on their property without the need for a zoning variance.
The Act is using $50 million to establish a permanent, revolving fund entitled the Residential Production Momentum Fund (the “RPMF”) to accelerate mixed-income and workforce multifamily housing projects. The RPMF will provide financial assistance in the form of debt, equity, or other instruments to projects building units targeting households with incomes between 60% and 120% of AMI. The legislation charges the RPMF to prioritize projects that include, among other things, energy efficient measures, lower embodied carbon construction materials and climate-resilient elements.
The Affordable Homes Act is part of Governor Healey’s ambitious affordable housing strategy which dovetails with her July 2nd announcement of $27 million in Housing Development Incentive Program tax credit awards targeting Massachusetts “Gateway Cities” with smaller populations and households with lower AMIs than the rest of the state.
Virginia Passes Bill to Evaluate Single-Stair/Point Access Block for Multifamily Dwellings
On April 4, 2024, Virginia Governor Glenn Youngkin signed into law Senate Bill 195, which directs the Commonwealth’s Board of Housing and Community Development (the “Board”) to convene a stakeholder advisory group (the “Advisory Group”) to evaluate and recommend revisions to the Uniform Statewide Building Code (§36-97, et seq. of the Code of Virginia) to allow Single-Stair/Point Access Block multi-family dwellings, provided that the building isn’t higher than six-stories. The Advisory Group must submit its findings to the Board, as well as the Chairmen of the State House Committee on General Laws and the Senate Committee on General Laws and Technology no later than December 1, 2024.
This new law reflects the efforts of policymakers across the country striving to modernize housing policy to increase access to affordable housing. However, unlike many initiatives which touch a single regulatory issue, such as density, zoning, lot size or environmental impact, Single-Stair/Point Access Block dwellings simultaneously address two distinct barriers to increase access to housing: density and zoning.
Single-Stair/Point Access Block is an architectural design concept prioritizing a single stairway within multifamily dwelling structures such as apartments or condominiums. This approach involves consolidating stair access to a single point within a residential or commercial block, provided it complies with local fire and building codes.
In traditional multi-story dwellings, multiple staircases are commonly dispersed throughout the building, leading to a network of access points on different floors. Traditional multifamily buildings may be larger to accommodate the multiple staircases, but will probably have smaller, more expensive units. Most American apartment buildings over four stories are required to have at least two means of egress from each unit.
In contrast, Single-Stair/Point Access Block multifamily buildings consolidate all staircases into a centralized location which encircles or is adjacent to the building’s elevator. More commonplace in European, North African and Asian multifamily buildings, this design maximizes useable square footage and can lead to buildings with larger units and increased density. If implemented at a larger scale in the United States, Single-Stair/Point Access Block buildings could increase both affordability and inventory in the communities where they can be built.
For the Advisory Group established under the new Virginia law, the Board will appoint experts in the areas of fire, safety and building design to discuss and evaluate whether or not to multifamily dwellings up to six stories can be adequately and safely served by a Single-Stair/Point Access Block. The Board’s discussions will most likely focus on whether multifamily buildings will be permitted under current zoning controls and if increasing the number of units in the Commonwealth’s multifamily buildings is worth potentially sacrificing multiple means of egress from a safety perspective. Many affordable housing professionals are looking forward to the Advisory Group’s findings to be submitted by the end of this calendar year.
Maryland General Assembly Establishes a “Maryland Only” CDE
By N. Gordon Knox, Partner
On April 8th, the Maryland General Assembly enacted The Housing and Community Development Financing Act (the “Act”), creating a state Community Development Entity (“CDE”) to utilize federal New Markets Tax Credits (“NMTCs”). The Act was part of Governor Wes Moore’s Legislative Housing Package which aims to, among other things, incentivize long-term financial investment in low-income communities in the State.
The Act established a CDE called the Maryland Community Investment Corporation (“MCIC”). CDEs are domestic corporations which serve as intermediaries for the provision of loans or investments in low-income communities. MCIC will be able to apply to the federal Community Development Financial Institutions (“CDFI”) Fund to receive an allocation of NMTCs to offer its investors in exchange for equity investments in the CDE.
Historically, low-income communities experience a lack of investment, as evidenced by vacant commercial properties, outdated manufacturing facilities, and inadequate access to education and healthcare service providers. The NMTC Program aims to break this cycle of disinvestment by attracting the private investment necessary to reinvigorate struggling local economies.
The U.S. Congress established the NMTC program at the beginning of this century. Congress authorizes the amount of credit, which the U.S. Treasury Department then allocates to qualified applicants, such as MCIC. From 2003 through 2023, the NMTC program has parceled out credits worth $40 billion (in 2023 dollars). The NMTC has supported more than 7,100 projects in all 50 states, the District of Columbia, and Puerto Rico through program year 2020. Some 43% of the U.S.’s roughly 74,000 census tracts qualify for NMTC investments; by 2020, approximately 4,300 had received NMTC projects. In recent years, all applicants have pledged to place at least 75% of their NMTC projects in “severely distressed” census tracts.
NMTC investors provide capital to CDEs, and in exchange are awarded credits against their federal tax obligations. Investors can claim their allotted tax credits in as little as seven years—5 percent of the investment for each of the first three years and 6 percent of the project for the remaining four years—for a total of 39% of the NMTC project. A CDE can be its own investor or find an outside investor. Investors are primarily corporate entities—often large international banks or other regulated financial institutions—but any entity or person is eligible to claim NMTCs.
There are a number of CDEs in Maryland but they are not required to make loans or investments in Maryland. MCIC is unique in that its statutory purpose is to facilitate qualified equity investments exclusively in Maryland. Now that MCIC has been established, it can apply for allocations of NMTCs and solicit investors interested in making meaningful investments in low-income communities in The Old Line State.
Gordon Knox is a partner, resident in the Baltimore office, and a member of the firm’s Affordable Housing & Community Development Group. Admitted to the bars of Maryland, the District of Columbia and Virginia, Mr. Knox’s practice focuses on new markets tax credits, tax-exempt municipal bonds and commercial real estate.
CDFI Fund Announces Historic NMTC Awards
On November 17th the CDFI Fund awarded a record $7 billion in New Markets Tax Credit allocation to 120 community development entities throughout the Country. Based on the conditions of the awards it is anticipated that approximately $5 billion of allocation will be deployed to support businesses in low income communities and $2 billion will be deployed for the development of real estate projects in low income communities. Also a priority is the deployment of New Markets Tax Credit authority in underserved states which in this round include Arkansas, Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, West Virginia, Wyoming, Puerto Rico, American Samoa, Guam, Northern Mariana Islands, and U.S. Virgin Islands.
Duane Morris and 5 Stone Green Capital Presentation on Combining Private Equity with Tax Credits
Art Momjian, Chair of the Duane Morris Affordable Housing, Community Development, and Syndication Practice Group and Victor Brown Managing Partner at 5 Stone Green Capital, a social impact private equity firm will lead a discussion on the opportunities to combine private equity with the Federal New Markets and Federal Historic Tax Credit programs. The presentation is timely with the historic $7 billion of New Markets Tax Credit allocation to be awarded by the Treasury in November. This presentation will be at the Philadelphia Office of Duane Morris from noon to 1 pm on Wednesday November 9, 2016. For further information and to register please contact Art Momjian at ajmomjian@duanemorris.com.
CDFI Fund Releases Draft Allocation Agreement
The CDFI Fund has released a draft of the proposed allocation agreement for the 2015-2016 New Markets Tax Credit allocation round. A new section added to the allocation agreement provides a limitation on QLICI proceeds which are used to repay or refinance documented reasonable expenditures. This section ties into the guidance provided in the December 2015 FAQs which imposes on CDEs in the next round of allocation the responsibility to include covenants in financing documents imposing the restriction, confirm the reasonableness of expenses, trace the use of QLICI proceeds both and after closing and maintain documentation to trace the use of QLICI proceeds for inspection by the CDFI Fund.
Art Momjian to Speak at NMTC Forum
Duane Morris Partner Art Momjian will be a speaker at the New Markets Tax Credit Forum sponsored by the Community First Fund on Tuesday September 13, 2016 from 7:30 am to 11:30 am at The Double Tree Hotel in Reading, PA. The program is designed for community leaders, developers, commercial realtors, commercial lenders, attorneys, CPAs and economic and community development professionals. Speakers will discuss the impact of the Federal New Markets Tax Credit program on commercial development in low income communities.
CDFI Fund to Award $7 Billion of NMTC Allocation
The CDFI Fund will award $7 billion of New Markets Tax Credit allocation in the next round to be announced by the end of 2016. As a result of the 5 year extension of the New Markets Tax Credit the CDFI Fund has elected to combine two $3.5 billion allocation rounds to create a historic $7 billion allocation of New Markets Tax Credit allocation. The round of awards to be announced by the CDFI Fund later this year will be effected by the December 2015 Certification, Compliance, Monitoring and Evaluation Frequently asked Questions issued by the CDFI Fund last year. Frequently Asked Question 44 eliminates the commonly used “one day loan” for this and future rounds of New Markets Tax Credit allocation awards.
New Markets Tax Credits Extended
Duane Morris Closes Historic Tax Credit Investment for Parke Bank
A Duane Morris team of lawyers including Art Momjian, Chris Winter, and Chris Bender represented South Jersey based Parke Bank in its investment in the Federal historic tax credits to be generated by the historic rehabilitation of 1831-1833 Chestnut Street in Philadelphia Pennsyvania. The property is formerly an office building being converted into residential rental apartments. The City of Philadelphia is replete with historic properties which are undergoing adaptive reuse and the Federal historic tax credit program is an important component of the capital stack to fund development costs.