2019 Qualified Allocation Plan QAP Changes under consideration

2019 Qualified Allocation Plan (QAP) Changes under consideration Virginia Housing Development Authority

2019 -2020 QAP Schedule 1/3 -1/8 & 1/18 QAP Discussions in multiple locations 2/15/2018 QAP Discussion Forum – The Westin, Richmond 4/10/2018 Present possible QAP Changes to Board 5/22/2018 2019 QAP Changes released for Public Comment 7/16/2018 2019 QAP Focus Group 7/18/2018 2019 QAP Public Hearing/Close Comment Period 8/15/2018 VHDA Board of Commissioners approve 2019 QAP 2

2019 -2020 QAP Discussion Items with Partners across Virginia • • • Green Certification, Building Amenity Changes Cost limits Timing Fees Additional Items • Note: throughout the discussions that the QAP pertains to both 9% and 4% allocations 3

VHDA Green Focus Group • Purpose is to give recommendation on Green building requirements and energy efficiency items for 2019 QAP • 14 Non-VHDA members to include General Contractors, engineers, property management, and Developers • Met once a month since October for 4 hours each time • Had presenters from 6 Green Certification programs – Earth. Craft Homes, LEED, Energy. Star, Passive House, National Green Building Standard (NGBS), and Enterprise Green Communities 4

Current Green Certification and Energy Efficiency Incentives • • • 5 LEED- Silver (15 pts), Gold (35 pts), Platinum (45 pts) Earth. Craft- Certification (15 pts), Gold (35 pts) with Benchmarking (add 10 pts) Dehumidification hookups and systems ($750 and $1, 500 cost increases) Energy Star Kitchen, Laundry Appliances, Windows and Glass doors Heat/AC-SEER-AFUE High performance Sub-metered water expense Water. Sense faucets, showerheads and toilets High speed internet service Energy efficient water heaters New Construction only: EPA Energy Star qualified bath vent fans R-3+ wall sheathing insulation

Potential Green Building Changes • Add baseline energy performance requirement – Focus Group suggestion • New Construction – Energy. Star Certification • Rehab and Adaptive reuse – % Increase in performance or HERS rating • Add more options for Green Certifications and have all certifications at same point amount, lower points – Focus Group Suggestion • Add NGBS, Enterprise Green Communities • Passive House (possible future points) • Keep Benchmarking • Remove some existing amenities considered “double dipping” – Points for Energy Star appliances because Energy. Star certification would be required 6

Potential Changes to Amenities • Brick • Simplify Calculation • Consider point reduction due to cost, timing and availability of other low maintenance exterior materials • Dehumidification points for entire building • Points for Wi-Fi • Community Room • Entire Property • • • Points for solid core doors Revisit the fire suppression and fire prevention points Recycling Plan/Program Bath Fans points for all (previously only NC) Innovation category Remove R-3 Sheathing and Sub metering points 7

Current Cost limits • Broken into 3 geographic areas adjusted in 4 th Quarter by regional Marshall and Swift factor for that quarter • Inner Northern Virginia • Prince William County, Loudoun County, & Fauquier County • Balance of State • Specific limits for New Construction/Adaptive Reuse and Rehabilitation with extra added for Structured parking • At 8609, costs are held to Reservation limits with a possible 5% overage allowed without penalty • Total Development Costs (TDC) are calculated as all soft costs, hard costs, developer fee, and acquisition/land costs 8

Potential Cost Limit Changes • Assign a square footage cost based on construction class (A, B, C, D) • Adjust for select amenities (e. g. elevators) • Localize with Marshall & Swift multipliers • Potentially remove certain development costs from TDC calculation (land, reserves)? Cost limits would be deal specific. 9

Current Timing Issues • Currently the Accessible Supportive Housing (ASH) and New Construction Pools receive forward allocations • Some forward allocations receive carryforward documents in February • Creates requirement to meet a 10% cost test in February of following year • Results in a few deals having different due dates than all other deals – complicates tracking • ASH Pool- Applications accepted starting in July • Requires an additional Board Meeting for review and approval • Creates separate documentation due dates 10

Potential Timing Changes • Alignment of Schedules/Carryforwards to run concurrently with other competitive deals within each year (all 2018 credits issued at the same time) • ASH pool to include simultaneous timing with competitive round (two applications for the same deal not allowed) • Forward allocations- Consider increasing the number of deals receiving forward allocations • RAD/Rural Deals – should we forward allocate these deals or require more executed contracts upfront? • Credit Refresh - for deals with threat of not placing in service on time offer a credit refresh option (NC method) 11

Fees • Restructure VHDA’s complex developer fee structure • Currently Tiered • Consider a flat rate(s), or maximum (Pa. has a $1, 500, 000 developer fee cap no matter the size of the deal) • Consideration of developer fees on a per unit basis • Currently based on TDC • Reduce 20% developer fee for 4% deals with Earth. Craft • Reduction of professional fees (or incentives for lower intermediary fees) • Currently no restriction on professional fees • Potential increases if targeting harder to serve populations ( e. g. 5% increase if doing PSH, held in escrow and could cover operating costs) 12

15 minute break 13

Additional Topics • Qualified Contracts (QC) – Currently no restriction on both 9% and 4% • Insert language to waive QC • Offer current incentives for those willing to present a contract on existing QC deals • Future penalties/banned from program if seeking a QC • Planned Foreclosures – Currently no language in QAP • Add language to prohibit and/or intervene if aware of “planned foreclosures” • Areas of Opportunity – Current incentive is to Census tracts with less than 12%, 10%, and 3% poverty • adequately addresses? • Limiting/not limiting Intermediaries – Currently Only Market Analysts are restricted at 15 deals each • same for consultants, attorneys, architects, engineers? 14

Additional Topics • Preservation Pool – Currently no pool • Creation of an additional pool set aside for rehab/preservation deals only (Stats regarding flood of incoming deals) • Not like previous Non-Competitive Preservation Pool from 2006 - 2009 • Balance of state parties have indicated no interest, instead want ability to do new deals • Revitalization – Should QAP require that the Qualified Census Tract (QCT) be also part of a larger revitalization plan per recommended best practices Currently no requirement for QCT • 9/4 Status –Solicited input regarding this point option and ways to strengthen it (Va is one of 10 states doing 9/4 hybrids) • Closing timing challenges - April 1 this year is a problem with TE Bonds and ability to get HAP contract through HUD • Developers have expressed need to tweak timing. 15

Additional Documentation • General Contractor (GC) Cost Certification – Currently only require Auditors report and an Owner’s Cost Certification • Provide a GC cost certification in addition to total development cost certification • Capital Needs / Physical Needs Assessment – Currently only require Unit by Unit write up in Reservation application • For credits awarded to rehab projects require a capital needs assessment by a competent/ licensed third party • Best practices also recommend this include a Phase I Environmental Study 16

Additional Considerations • Restructure Accessible Supportive Housing Pool (ASH) – Current requirement is 25% accessible units with project based vouchers. • • • 17 Require either PSH or DOJ preference to qualify for pool Reduce accessibility and disability requirement to 10% of units Require that services be provided Cap requests to maximize deals that can get funded ($500 k? ) Deals can either apply directly into the ASH pool or roll into the ASH pool from the geographic pools if PSH and/or DOJ with documented services is being provided

Additional Considerations • Incentivize Tenant Services – Currently only incentivize services in permanent supportive housing. • Require MOU with providers. • Non-profit involvement- Current structure does not evaluate non -profit’s participation or financial stability • Tiered structure for Non-profit involvement based on ties to the locality and likelihood of exercising Right of First Refusal (ROFR) Purchase Option. 18

Other thoughts • Flexible language relative to numbers and processes outlined in the QAP • Add language that basis boost will be removed if deal is financially feasible without it • Remove disqualifications - insert curing period • Required site visit 19