State Agencies Getting Tough on Developers

Agencies in a number of states have tightened the requirements for developers with regard to being eligible to apply for tax credits. Iowa, Texas, and Florida have all added requirements that expand the ways applicants may be deemed ineligible for the LIHTC program.

In Iowa, the 2011 Qualified Allocation Plan contains provisions that allow for the barring of a development team member or other significant party due to receipt of an 8823, regardless of whether the problem has been corrected. The state also will deem parties ineligible for program participation if, within the prior ten years, they have gone into bankruptcy, had an adverse fair housing settlement, or a civil rights settlement.

The 2011 Texas QAP indicates that an applicant is ineligible for credits if any owner, developer, or guarantor involved with the application has breached a contract with a public agency and failed to cure the breach, or misrepresented to a subcontractor the extent to which the developer benefited from a public agency award. Owners will also be ineligible if they have been removed as a principal from an income/rent restricted multifamily development by a lender, investor, or other owners during the prior ten years.

Florida is proposing a rule change that will require development team members to undergo increased financial scrutiny. The proposal would permit the state to require information on past projects and the financial history of any team member. Those with poor past performance records, a lack of financial capacity, or any other unsatisfactory finding will receive a negative recommendation by the underwriter, which would make application approval very difficult.