The following terms and conditions are the Fairfax County Redevelopment and Housing Authority (FCRHA) requirements, which are incorporated in the final bond documents in either the deed restrictions, loan agreement, or FCRHA Land Use Restriction Agreement:
A. Federal and State Income Requirements for Low Income Units
The income limits described below are the minimum federal and state requirements that must be met.
a. Income Limits—For lower-income tenants, anticipated gross household income for the twelve month period after occupancy of a unit cannot exceed the applicable Federally required percentage of the Washington, D.C. Metropolitan Statistical Area (MSA). The limits are revised when the U.S. Department of Housing and Urban Development (HUD) publishes a new area median income figure. Federal tax rules require that either (i) twenty percent (20%) of the units must be rented to tenants whose adjusted income is fifty percent (50%) or less of the median gross income for the Washington, D.C. MSA or (ii) forty percent (40%) of the units must be rented to tenants whose adjusted income is sixty percent (60%) or less of the median gross income for the Washington, D.C. MSA. The owner must make an irrevocable election at the time the bonds are first issued with respect to the property and that election will govern the tenant income requirements for the property for so long as it is financed with tax-exempt bonds (with a minimum of 15 years meeting the set-aside requirements). Certain refundings of older tax-exempt bond projects will be subject to less stringent requirements.
(Visit https://www.huduser.gov/portal/datasets/il.html for income limits.)
b. Evidence of Compliance—Compliance with the income limit must be demonstrated by completion of a notarized income certification form, which includes each income earner who intends to reside in the unit. The certification form for the household will be in the form provided to developers by FCRHA, as such form may be changed from time to time upon advice of FCRHA’s bond counsel. In addition to completing such form, each tenant will have to supply evidence of anticipated income for the twelve month period (i) after occupancy of a unit (for newly-constructed developments), or (ii) from the date of issuance of bonds (for acquired and rehabilitated developments). This evidence shall take the form of an employer’s written verification of income (in the case of employed tenants), or a copy of the previous year’s executed federal tax return (in the case of self-employed or unemployed tenants) or other evidence acceptable to the FCHRA. Such evidence of compliance will be made available to the bond trustee and/or the FCRHA as determined at bond closing.
c. Outside Developments--For developments located outside Fairfax County, which are financed by the FCRHA, low and moderate income limits will be established by that jurisdiction for that development consistent with state and federal law. No such development will be financed by the FCRHA unless: (1) The governing body of the jurisdiction in which the development is proposed to be located requests that the FCRHA issue bonds and consents to the development by resolution; (2) The Fairfax County Board of Supervisors authorizes the FCRHA to undertake such financing; and (3) The outside jurisdiction and FCRHA have entered into a cooperative agreement.
B. FCRHA Requirements
1. Lower-Income Units (Rents)
a. The FCRHA reserves the right to require affordable rent restrictions on properties for which it provides financing. Typically, multifamily properties for which FCRHA tax-exempt bond financing is needed for the acquisition and rehabilitation of existing properties or for new construction will be subject to affordable rent restrictions on the percentage of units that must be rented to low income families for federal tax purposes. If the project is also using federal low income tax credits, rents will be restricted for the tax credit units. The rent schedule established for the lower-income units included in the Application or as amended will be the FCRHA rent schedule in effect at the date of bond closing.
(Visit http://www.vhda.com for rent information.)
Low Income Affordable Rent Determination Table
| Type | Unit Adjustment Factor (to be applied to either 50 or 60 percent of MSA Income) |
|---|---|
| 5 bedroom | 1.28 |
| 4 bedroom | 1.16 |
| 3 bedroom | 1.05 |
| 2 bedroom | .0 |
| 1 bedroom | .75 |
| Efficiency | .70 |
”Affordable” is defined to mean that tenants pay no more than 30 percent of gross monthly income for rent and utilities. A utility allowance for each size unit will be agreed upon based on comparable operating data, engineer estimates, or utility company estimates. Affordability is determined for each unit size using the appropriate adjusted incomes derived from the table above.
b. Rent increases on the lower-income units in the first two years after 10 percent of newly constructed or rehabilitated units are occupied shall be limited to either (a) a maximum annual increase of 6 percent, or (b) an amount determined by the percentage increase in the Washington, D.C. MSA median income as published by HUD, whichever is the lesser. Increases in subsequent years will be commensurate with percentage increase in Washington, D.C. MSA median income as published by HUD. Rent increases will be limited to one each 12-month period.
c. For rehabilitation projects, any unit occupied by a Section 8 Voucher holder shall continue to be rented at or below the Section 8 existing FMRs as applicable in Fairfax County. Any unit rented under Section 8 at the date of application shall be preserved as a Section 8 unit. Existing Section 8 tenants may not be displaced due to rent increases.
C. Other FCRHA Requirements
1. 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.
2. The Loan Agreement will provide that the Developer is responsible for all fees and expenses of the FCRHA and Bond Counsel with respect to any post-closing questions, interpretation, performance, enforcement or amendment of the bond documents or any other documents relating to the Project or the bonds.
3. If market conditions permit, those units designated as lower-income units in a new construction development shall be allocated as follows: Of the lower-income units, a maximum of 15 percent shall be efficiency and one-bedroom units; no less than 40 percent shall be two-bedroom units; and 30 percent shall be three-bedroom units. However, no more than 50 percent of all three-bedroom units in the development shall be lower-income units.
The distribution will be among all unit types (i.e. garden apartment or townhouse). The location of these units need not be permanently established. These may vary from time to time as long as the units are distributed throughout the development and not concentrated in one or more sections or buildings. For purposes of the initial rent-up period following construction or rehabilitation, the developer must provide the FCRHA with a distribution plan showing the initial location of the lower-income units.
In a rehabilitation development, the distribution of lower-income units shall reflect the existing configuration and the needs of current tenants.
4. If market conditions permit, at least 50 percent of the units in any development (exclusive of developments designed specifically for the handicapped or elderly) shall be clearly designed for family occupancy. At least one of the secondary bedrooms in the three bedroom units shall comprise a minimum of 100 square feet and shall be furnishable for two person occupancy. At least 50 percent of the secondary bedrooms in two bedroom units shall comprise a minimum of 100 square feet and shall be furnishable for two person occupancy.
5. If market conditions permit, a minimum of 10 percent of the total number of units in the development must be three bedroom units.
6. All units in the development must be similarly constructed.
7. No applicant shall be denied participation in the pool of applicants or denied the opportunity to occupy a unit within the development because of participation in the Section 8 Voucher Program or any rental assistance program administered by the FCRHA or Fairfax County as long as rents (including utilities) for the units in the development are within the eligible limits under such program.
8. Occupancy requirements cannot be less restrictive than the Fairfax County Housing Hygiene Code.
9. The rental policies established by FCRHA for lower-income units will remain in effect for a “Minimum Period” which shall begin on the first day that the first lower-income unit is rented and end on the later of (i) the end of the “qualified project period” for federal tax purposes (generally 15 years) or (ii) the date on which the bonds are no longer outstanding (bonds that have been defeased shall be deemed outstanding for the purpose of FCRHA rental policies until the date of redemption of such bonds). Each developer shall submit a plan to assure the availability of lower-income units beyond the Minimum Period. Financing priority shall be based on plans to extend the period for which lower-income units will be available beyond the Minimum Period. FCRHA rental policies will remain in effect regardless of whether federal regulations are subsequently relaxed or whether the bonds are paid off.
10. A plan to assure availability of lower-income units beyond the minimum qualified project period shall be submitted by the developer. If the project remains a rental project, there will be an agreement to make a portion of the units available to any federal, state, local, or owner sponsored rent supplement program.
11. The FCRHA must be provided with written notice of any liens placed on the subject property during the Minimum Period.
12. For the longer of the “Qualified Project Period” or the period during which the bonds are outstanding, the mortgagor must submit to the FCRHA for its review and comment copies of all proposed management agreements and management plans, the proposed operating budget, and any reports required by FHA or other credit enhancement provider. Certain terms and conditions of the financing must be included in the tenants’ leases for the development. The proposed form of lease for the lower income units and for the moderate-income units must be submitted to the FCHRA for review and approval.
13. For the longer of the “Qualified Project Period” or the period during which the bonds are outstanding, FCRHA representatives will at all times during normal business hours have the right to inspect all project books and records pertaining to the acquisition, construction, financing, operation and maintenance of the project.
14. The mortgagor must submit to the FCRHA, within 90 days after the end of each fiscal year, an annual audit including any management letter. This may be a copy of the same audit and related financial report that is required to be submitted to the limited partners (if any), the credit enhancement provider, or the purchaser of the bonds. Should an audit be required by any entity other than the FCRHA, such audit must be submitted to the FCRHA.
15. The mortgagor must keep the property insured to replacement value in accordance with FCRHA insurance requirements while the bonds are outstanding.
In the event that the development is destroyed or damaged, the mortgagor will be required to rebuild and to use insurance proceeds for such purpose except where an independent registered engineer acceptable to the FCRHA concludes that rebuilding is economically infeasible.
16. The developer will be required to establish a replacement reserve for the project based upon an analysis of components which will reasonably need replacement during the “Qualified Project Period” or the term of the bond, whichever is longer. A replacement reserve plan must be submitted by the developer and approved by the FCRHA. The replacement reserve may be reflected, initially, outside the operating budget. A replacement reserve required by a credit enhancer for the bonds will satisfy the FCRHA replacement reserve requirement, provided the reserve amount per unit per year is at a level acceptable to FCRHA.
17. Certification of all costs associated with the development is required by the FCRHA before final disbursement of bond proceeds. Where an identity of interest exists between the mortgagor and the general contractor, a cost-plus construction contract must be used unless the FCRHA approves the use of a Guaranteed Maximum Price Contract. The FCRHA shall require construction retainage in an amount up to 10 percent of the construction contract. Half of the retainage will be released upon substantial completion of the project and the balance upon the receipt and approval of a final construction cost certification prepared by an independent certified public accountant acceptable to the FCRHA, final release of liens, insurance endorsements and all occupancy permits.
18. In the case of a public offering, bond issues must be rated “A” or better by the Standard and Poor’s Corporation, Moody’s Investors Service, Inc. or Fitch, Inc. at the time of issuance. In the case of a private placement, a rating may not be required. However, should privately placed bonds subsequently be made available for any type of public offering, a rating satisfactory to the FCRHA must be obtained and a disclosure document satisfactory to the FCRHA must be prepared prior to such sale.
19. Bonds that are privately placed shall be subject to the following restrictions on transferability: (i) Authorized Denominations must be $100,000 or any integral multiple of $5,000 in excess of $100,000, (ii) bonds may be transferred only to a “qualified institutional buyer” as defined in Rule 144A of the Securities Act of 1933, as amended. With the consent of the FCRHA, certain exceptions may be made in the case of a seller take-back financing as the seller knows the property and the market and may be considered a sophisticated investor, (iii) the initial purchaser shall be required to deliver an investor letter to FCRHA in a form satisfactory to FCRHA, and (iv) the privately placed bonds shall be purchased pursuant to a Bond Purchase Agreement between the FCRHA and the bond purchaser.
20. Certain developer fees which are permitted to be capitalized with respect to the Property can be included as part of the 95 percent "good" costs for federal tax purposes.
21. The FCRHA will review all plans to determine consistency with prior representations and requirements of any Conservation, Rehabilitation, Redevelopment, or Neighborhood Revitalization Strategy Areas where applicable.
22. The FCRHA will participate in the construction draw process. The FCRHA must approve the inspecting architect and the frequency of inspections. Where a financial institution or insurance company is providing the credit enhancement, the FCRHA must be notified of all draw meetings, and have an established period of time prior to draw approval in which to review and comment on the draw request. The FCRHA’s written approval of all draw requests will be required prior to the release of funds. Where the mortgage is FHA insured, the FCRHA must be notified of all draw meetings and receive copies of the approved draws. Copies of all inspection reports must be provided to the FCRHA.
23. Upon the FCRHA’s discretion, the FCRHA is to receive a copy of all change orders and will have a right to approve or disapprove each single change order in the amount of $10,000 or more, cumulative change orders of $50,000 or more, and all diminutions to the construction contract must be approved by the FCRHA.
24. For new construction and substantial rehabilitation, a 100 percent payment and 100 percent performance bond or guaranty will be required. Cash or a letter of credit in the amount of 25 percent of the construction contract amount can be substituted for the bond or guaranty. The FCRHA may accept a different guaranty where the credit enhancer approves it.
25. FCRHA representatives will at all times during normal business hours have the right to inspect the work during the construction period.
26. The development must meet all applicable state and local zoning, building, and health codes.
27. Any funds remaining in the construction fund after completion of construction will be used to redeem bonds or to benefit the project. Any funds remaining under the indenture when the bonds are paid off shall be disbursed under the terms and conditions of the Trust Indenture.
28. The mortgagor shall provide recourse indemnification to the FCRHA, its officers, commissioners, employees and agents from damages, costs, fees and expenses arising due to (i) failure of the mortgagor to comply with its representations, covenants and warranties set forth in the bond documents, (ii) environmental hazards arising at or in connection with the Property or the land, regardless of cause, (iii) actions omissions, accidents, injury, death, or any other event or condition at or related to the land or the Property, its construction, management or operation, (iv) any audit or inquiry by the Internal Revenue Service pertaining to the tax-exempt status of the bonds, and (iv) any “bad boy” acts or omissions, all as set forth in the Loan Agreement. The mortgagor’s obligation to pay the FCHRA on-going monitoring fee shall also be a recourse obligation.
29. A debt service coverage ratio of at least 1.2 will normally be required after construction completion. However, a lower initial ratio may be acceptable after project completion depending on provisions by the mortgagor to insure against operating deficits.
30. The fee arrangement with underwriters and gross take down must be fully disclosed to the FCRHA prior to marketing of the bonds.
31. The mortgagor agrees to comply with the Federal Fair Housing law (Title VIII of the Civil Rights Act of 1968, as Amended by the Housing and Community Development Act of 1974) to not discriminate against any person because of race, color, religion, sex, or national origin in the sale or rental of housing or in advertising the sale or rental of housing.
32. There shall be a bond trustee, which shall be selected by the FCRHA.