Rental Housing Works (RHW)

Purpose of Rental Housing Works (RHW)

The purpose of RHW is to create jobs and strengthen the Maryland economy by providing gap financing for the creation and preservation of affordable rental housing financed through DHCD’s Multifamily Bond Program and Low Income Housing Tax Credit Program. RHW is funded at $17.5 million for FY 2013.

Overview

RHW is subordinate gap financing to be used solely for projects financed using DHCD’s Multifamily Bond Program (MBP) and 4% Low Income Housing Tax Credits (Tax Credits). Therefore, projects requesting RHW funding must meet the requirements for both MBP and Tax Credits, including those described in the Maryland Qualified Allocation Plan (QAP) and Multifamily Rental Financing Program Guide (Guide).

The RHW appropriation is being made through DHCD’s existing Rental Housing programs and, except as otherwise noted in this document, RHW funding is subject to the laws (statutes, regulations and Program Guide), applicable to the:

• Rental Housing Production Program (RHPP), for general occupancy projects; or
• Elderly Rental Housing Program (ERHP), for age-restricted projects.

RHW funding requests will be evaluated and processed in conjunction with the project’s MBP and Tax Credit application. For RHW projects also requesting other DHCD sources of funding, such as Partnership Rental Housing Program (PRHP), Be Smart, Maryland Housing Rehabilitation Program (MHRP) funds, the projects must also meet the criteria for these additional funding sources.

RHW Requirements

RHW funding is governed by the laws applicable to DHCD’s Rental Housing programs, including the requirement for a local contribution, with the following changes:

• Applicants for RHW funding do not need to compete in a DHCD Competition for LIHTCs and Rental Housing Funds.
• RHW must be used in conjunction with DHCD’s tax-exempt bonds and 4% LIHTCs and RHW applications should be submitted in conjunction with a MBP application.
• In addition to meeting DHCD’s MBP, LIHTCs, and RHF requirements, RHW applicants must satisfy the following additional threshold criteria:
  • Required zoning for use and density of development must be in place at the time of application and properly documented. A letter from the local zoning office would be proper documentation. An approved PUD resolution or a local jurisdiction’s equivalent to a PUD resolution satisfies this requirement. Development or site plan approval is not required at application. Conditional use or special exception approval also is not required at threshold and is up to the developer to obtain before closing.
  • The award of any competitive public and private sources of funding necessary for the project’s financial feasibility must have been made; and
  • The project’s projected FTE must be documented using the FTE Job Calculator .
  • The Board of Public Works must approve all RHW funding awards because the source of the RHW funding is general obligation bonds.

Requests for RHW Funding

Beginning May 14, 2012, RHW Applications will be accepted on an ongoing basis in conjunction with an application for the DHCD Multifamily Bond Program (MBP) and 4% federal Low Income Housing Tax Credits (LIHTCs). For MBP applications on file with DHCD prior to May 14, 2012, a request for RHW funding must be made by completing the RHW application and submitting this application to DHCD on or after May 14, 2012.

Application Processing

The RHW Application  Form may be downloaded from the DHCD website at: http://www.mdhousing.org/website/programs/RHW/documents/RHW_application.docx

• RHW applicants must submit and sign the RHW Application Form and provide the required threshold documentation.
• DHCD will track applications based on date of receipt and will notify applicant of the date received.
• RHW applications will be reviewed in conjunction with MBP applications.
• For projects already in process for MBP, DHCD will complete the threshold review for RHW funding within 30 days of receipt of the RHW application.
• If the project does not meet the RHW threshold criteria, the RHW application shall be rejected and removed from processing, and the Applicant notified in writing.
• The rejection notice shall state the reason the application has been rejected.
• The Applicant may address the threshold issues and submit a new application, which will receive a new date of receipt.
• Projects that pass threshold will be scored using the Evaluation Criteria in the Guide and must score at least 185 points, as required for MBP.
• Kick-off meetings will be scheduled for MBP/RHW projects after scoring is complete.
• At the kick-off meeting, a timeline and critical path schedule will be distributed.
• Projects will proceed in accordance with the agreed-upon schedule.
• Projects will be funded on a “first-ready, first served” basis.

Applicants should be aware that failure to meet processing timeframes and requirements for the Multifamily Bond Program and other necessary sources of funding for the project will affect the project’s ability to receive RHW funding.

Limitations on RHW Funding Amounts

Subject to an overall maximum loan amount per project of $2.0 million for new construction and $1.5 million for acquisition/rehabilitation projects, RHW funding amounts will be limited to the greater of $12,000/unit or $20,000/FTE.

FTE per project will be determined using DHCD’s Resource Allocation Model (RAM). The FTE Job Calculator  to determine FTE is available at: http://www.mdhousing.org/website/programs/RHW/documents/RHW_calculator.xls

The total units in a project, including market rate units in mixed income projects, will be used to determine funding levels using the per unit limit.

Loan Terms

40 year term; 2% interest rate with DHCD agreeing to share 25% of cash flow with the borrower.

DHCD will agree to share 50% of the cash flow for Multifamily Bond Projects with RHW provided the following 3 conditions are met:

• More than 25% of the developer fee is deferred;
• The borrower agrees to equity sharing at the earlier of the sale or refinancing of the RHW financed project. The equity share provided to DHCD will be the percentage of net equity equal to the percentage of RHW funding to the total development costs as calculated in the final cost certification. The equity share will be subject to an overall cap based on tax considerations.
• There is no additional DHCD amortizing or cash flow debt on the property. DHCD grants and deferred loans, including PRHP, CDBG and MAHT funds, will not preclude a project from qualifying for a 50/50 cash flow split.

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