Property Acquisition Policy

IX. REAL PROPERTY ACQUISITION/CONVERSION –MARKET RATE TO AFFORDABLE

See the DOH website page for current details on the Consolidated Application page.

This policy applies when a proposed transaction consists solely of the acquisition of a multifamily residential property by an eligible nonprofit corporation, housing authority or municipal developer with the intention of converting such multifamily residential property into long-term affordable rental housing.

A.  Project Overview:

1. Project Selection. Vacant or unoccupied properties are preferred.Occupied properties may be considered; however a detailed analysis of the existing residents including rent level, household composition and income and lease status will be required.
2. Property Condition.Property must be decent, safe and sanitary and occupiable within 30 days of acquisition.Any level of rehabilitation necessary renders the property ineligible for acquisition/conversion.
3. Affordability. Minimum affordability term is thirty (30) years.
4. Income Mix. Project must incorporate a balanced mix of affordable income levels. Household incomes may include 30% of AMI, 50% of AMI and cannot exceed 80% of AMI. In addition, there must be balance between the number of 30% and 80% of AMI units.
5. Valuation. Maximum Acquisition Cost is determined as the lesser of:
   
   
   1. Cost certified Total Development Cost plus Developer Profit. Total development cost is determined before developer profit through cost certification.
      1. Premium above hard cost + soft cost              Not allowed
      2. Developer’s fee/profit                                      10-15% of eligible cost
      3. Market Appreciation                                         Not allowed
      4. Speculative profit                                             Not allowed

          

   2. Comparable Market valuation.

   Not less than two (2) appraisals must be provided.  Should the appraisals be more than 10% apart in value, a third review appraisal may be required.  Appraisals should evaluate property value using all three valuation methodologies in accordance with current appraisal standards.
   
   

6. Financing. Financing may be in the form of grants, deferred loans or conventional loans.
   1. Grants.Grants may be offered for properties with deep income targeting where at least 30% of the units serve households at or below 50% of AMI.
   2. Loans or Deferred Loans.Loans or Deferred loans are the primary sources of financing to be utilized.