Housing and Community Development

CONTACT INFORMATION: Operating Hours: 8AM-4:30PM M-F
703-246-5000 TTY 711
3700 Pender Drive
Fairfax, VA 22030
Tom Fleetwood
HCD Director

Tax-Exempt Multifamily Housing Financing Program

Municipal BondsThe Fairfax County Redevelopment and Housing Authority (FCRHA) began a tax-exempt financing program in the late 1970s to:

  • Encourage the creation of new and preservation of existing rental housing units; and
  • Ensure that not less than 20 percent of the units in a rental development financed through the program are rented to lower-income households

Through tax-exempt financing, the FCRHA is able to provide a vehicle for private developers to obtain below-market interest rate mortgages to acquire, construct and rehabilitate multifamily developments. In return for this favorable financing, developers are required to rent a specified percentage of the units in the project to low-to-moderate-income persons in accordance with the requirements of federal law pertaining to tax-exempt bonds.  

Bonds are debt securities issued by corporations and governments. When the FCRHA issues a bond, it borrows money from bondholders (private individuals, commercial banks, institutional investors, etc. who purchase bonds as investments) then uses it to invest in an affordable housing development with a promise of repaying the loan principle and applicable interest on time and in full to the bondholders. Tax-exempt bonds are so called as they are not subject to federal, and in some cases, state and local income taxes.

Under the terms of the Tax Reform Act of 1986, multifamily rental project financed with tax-exempt bonds must be rented to tenants in one of two categories:

  • 20 percent of the units must be rented to tenants whose income does not exceed 50 percent of the Metropolitan Statistical Area (MSA) median income, adjusted for family size; or
  • 40 percent of the units must be rented to tenants whose income does not exceed 60 percent of the MSA median income, adjusted for family size.

Steps and Timeline to Apply

Meeting to be held between Developer/Owner and staff of the Fairfax County Department of Housing and Community Development (HCD) to discuss the project and the requirements of the FCRHA.

Timing: Dependent on the developer

Developer/Owner submits Application Form and Application Materials and non-refundable application fee of $5,000 to FCRHA.  In addition, the Developer/Owner executes an engagement letter with Bond Counsel pursuant to which the Developer/Owner is obligated to pay Bond Counsel’s fees and expenses (whether or not the bonds are issued) and deposits a $10,000 retainer with Bond Counsel which will be applied as a credit against the total fee at closing (or if the financing does not close, at the time the balance of the fee is due).

Timing: Dependent on the developer

Once the entire application is received, The Fairfax County Department of Housing and Community Development (HCD) will finalize its analysis and it will be reviewed by the HCD Loan Underwriting Committee.

Timing for steps 3 and 4: Approximately 3 weeks

The Declaration of Intent (sometimes referred to as an “inducement resolution”) is a conditional statement of the intent by the FCRHA to consider the future issuance of tax-exempt bonds for a given project. A Declaration of Intent is not required under federal tax law and is not applicable to the issuance of refunding bonds for existing projects. However, a Declaration of Intent is important in the case of new construction financings because only those development costs incurred on or after 60 days prior to the Declaration of Intent are eligible for reimbursement with proceeds of the tax-exempt bonds.  

Timing for steps 3 and 4: Approximately 3 weeks

The Developer/Owner will make a presentation to the FCRHA at the next regular meeting (or at a special meeting) following the Declaration of Intent (if applicable) and prior to the TEFRA Hearing. 

Timing: Approximately 4 weeks

As required by law, FCRHA will hold the federally required TEFRA Public Hearing.  The Internal Revenue Code requires issuing agencies to hold Tax Equity and Fiscal Responsibility Act (TEFRA) hearings to provide the public the opportunity to comment on projects.  At the conclusion of the TEFRA hearing, the FCRHA will authorize submitting the proposal for tax-exempt bond financing to the Fairfax County Board of Supervisors.  

Timing: Approximately 4 to 5 weeks

Consistent with the requirements of TEFRA, the Board of Supervisors will be asked to approve the bond issuance.  Under state law, approval by the Board of Supervisors Resolution is required to occur within 60 days after the TEFRA Hearing.  Comments, if any, received at the hearing will be incorporated into the Board Item for consideration.

Timing: Approximately 4 weeks

Following the approval of the bond issuance by the Fairfax County Board of Supervisors, County staff submits an application to the Virginia Department of Housing and Community Development (VADHCD) to authorize a bond volume cap of the same amount as the bond issuance approved by the Board of Supervisors. The federal government allocates a certain amount of bonds for each state on an annual basis, and the states cannot exceed their annual allocation, or volume cap. In the case of Virginia, VADHCD administers that bond volume cap. VADHCD approves the volume cap for each individual project.

Timing:  Approximately 3 weeks 

The Developer submits all Supplemental Application Materials.  These will be reviewed by HCD staff following the receipt of a complete and acceptable package. 

Timing: Depends on developer

One week prior to the FCRHA meeting at which the final Bond Resolution will be considered, Bond Counsel will deliver to HCD bond financing documents in substantially final form.

Timing for steps 9 and 10: Approximately 4 to 5 weeks

At an FCRHA meeting, the FCRHA Commissioners will act on a final Bond Resolution to approve (i) the issuance of the Bonds, (ii) the execution and delivery of the bond documents, (iii) the execution and delivery of a bond purchase agreement, (iv) the form of the Official Statement (if the bonds are publicly offered) and (v) the Underwriter for the bonds.

Timing for steps 9 and 10: Approximately 4 to 5 weeks

The Bond Closing is held in the offices of Bond Counsel.  At the closing, the Bonds are issued and all documentation is executed and delivered, including delivery of the credit rating on the bonds if the bond issue is publicly offered. 

Timing: Approximately 2 weeks

In total, the issuance of tax-exempt bonds in connection with this program can occur within approximately 6 months.


Developer Fees and Expenses

Application Fee: A $5,000 non-refundable fee is payable at the time an application for financing is submitted.

Bond Counsel Engagement: At the commencement of the financing, the Developer will be required to execute an engagement letter with Bond Counsel and to deposit a $10,000 retainer with Bond Counsel.  Should the project not go forward, any unspent retainer fees shall be refunded to the borrower.

Commitment Fee: This fee is based on the principal amount of the bonds issued and is payable at closing:

Principal Amount of Bonds Issued Fee
Up to $10 million 1 percent
Between $10 million and $20 million 1 percent of the first $10 million ($100,000) plus 4/10 percent of the balance
Over $20 million 7/10 percent of $20 million ($140,000) plus 1/10 percent of the balance

Note: This is equivalent to 1 percent of the first $10 million, 4/10 percent of the next $10 million, and 2/10 percent on the balance.

Monitoring or Administrative Fee: This is an annual fee for the term of the bonds, payable on each payment date:  0.25% of the aggregate principal amount of the bonds outstanding on each payment date needs to be paid above the line, as a part of the NOI calculation, for a long-term bond issuance. For short-term bonds, there will be an upfront monitoring fee of $65,000/yr. until the mandatory tender date (as extended, if applicable), and an annual monitoring fee of $15,000 below the line beginning after that date.   

Expenses also include:

  • Cost of appraisal, market study, environmental studies and if required, construction cost analysis, construction cost certification and other special studies.
  • Bond counsel, underwriter’s fees, issuance expenses, trustee’s fees and all other expenses incurred, regardless if the bond closing occurs.
  • FCRHA Out-of-Pocket Expenses:  Developer will be responsible for paying all out-of-pocket expenses incurred by the FCRHA. These expenses may include, but are not limited to, travel, mailing and publication costs. For administrative reviews and approvals related to FCRHA-issued bonds, the developer will be responsible for staff costs, out-of-pocket expenses and costs described in number one and two above. 

See Also

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