[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15443-15448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05045]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6359-N-01]


Administrative Guidelines: Subsidy Layering Review for Project-
Based Vouchers

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: This notice provides updated Administrative Guidelines 
(Guidelines) and requirements for Project-Based Voucher (PBV) Subsidy 
Layering Reviews (SLRs) and SLR requirements for Mixed-Finance projects 
that may or may not include PBV assistance. This updated notice 
provides transparency on HUD's expectations regarding cash flow, debt 
coverage ratios, net operating income, operating expense trending 
requirements, and expands guidance related to expense coverage ratios, 
when projects do not have hard debt. This notice also introduces a new 
mailbox ([email protected]) for SLRs requests to be performed by HUD HQ, 
and for SLR certifications and supporting documentation for SLRs the 
Housing Credit Agencies (HCAs) completed. Finally, the guidance expands 
the delegation of SLRs to HCAs to cases where PBV assistance is 
combined with other government assistance. Previously, the delegation 
only covered cases that included Low-Income Housing Tax Credits 
(LIHTCs). Otherwise SLR cases had to be completed by HUD (see overview 
chart in Section IV).

FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez Sanchez, Director, 
Housing Voucher Financial Management Division, telephone number 202-
402-4212 or Belinda Bly, Supervisor, Urban Revitalization Division, 
telephone number 202-402-4104 (neither are toll free numbers). 
Addresses for both: c/o Office of Public and Indian Housing, Department 
of Housing and Urban Development, 451 7th Street SW, Washington, DC 
20410. HUD welcomes and is prepared to receive calls from individuals 
who are deaf or hard of hearing, as well as individuals with speech and 
communication disabilities. To learn more about how to make an 
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Background

    In support of HUD's mission to create quality affordable housing, 
HUD provides funding assistance to incentivize affordable housing 
development. Subsidy layering reviews (SLRs) are undertaken to ensure 
the amount of assistance provided by HUD is not more than necessary to 
make the PBV project feasible in consideration of all other government 
assistance. SLRs prevent excessive public assistance that could result 
when a development proposes combining (layering) the HAP subsidy from 
the PBV program with other public assistance from Federal, State, or 
local agencies, including assistance through tax concessions or 
credits.
    SLRs for PBV assistance are required pursuant to Section 8(o)(13) 
of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)); Section 
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008 
(HERA); and Section 102 of the Department of Housing and Urban 
Development Reform Act of 1989. SLRs are only for proposed PBV new 
construction and rehabilitation projects as defined in 24 CFR 983.3. 
Under the current PBV regulations at 24 CFR 983.55(b), the SLR must be 
completed prior to execution of the Agreement to Enter Into a Housing 
Assistance Payments Contract (AHAP).
    SLR requirements are not applicable to existing housing.\1\ PBV 
regulations at 24 CFR 983.3 define existing housing as units that 
already exist on the proposal selection date that substantially comply 
with Housing Quality Standards (HQS) on that date. (The units must 
fully comply with the HQS before execution of the HAP contract.) In 
addition, no SLR is required when PBV is the only government assistance 
provided to a project.
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    \1\ Section 2835(a)(1)(F) of Housing and Economic Recovery Act 
of 2008 (Pub. L. 110-289), enacted July 30, 2008, does not require 
subsidy layering review for existing housing.
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    Pursuant to 24 CFR 983.55, public housing agencies (PHAs) must 
submit a request for an SLR for a proposed PBV project when the project 
includes other government assistance. HUD can perform the SLRs in all 
cases, and prior to issuance of this notice, the Department had 
delegated SLR authority to participating Housing Credit Agencies (HCAs) 
only when assistance included LIHTCs. This Notice expands the option to 
delegate SLR authority to HCAs for proposed PBV projects when PBV 
assistance is combined with other governmental assistance even if no 
LIHTCs are included.\2\
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    \2\ Pursuant to the Housing and Community Development Act of 
1992 (Pub. L. 102-550, approved October 28, 1992), as amended by the 
Multifamily Housing Property Disposition Reform Act of 1994 (Pub. L. 
103-233, approved April 4, 1994) added a ``Subsidy Layering Review'' 
provision at 42 U.S.C. 3545.
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    In cases where PBV projects do not include LIHTCs, but there is a 
participating HCA in the project's jurisdiction, the HUD Field Office 
will ask the HCA whether they can perform the SLR. However, the PHAs 
may request that the HUD HQ perform the SLR. If PHAs do not request 
that HUD HQ perform the SLR, the HUD Field

[[Page 15444]]

Office will ask the HCA first, but if the participating HCA is not 
available to perform the SLR, the HUD Field Office will refer the case 
to HUD HQ to perform the SLR. HUD recommends that PHAs communicate in 
advance with the participating HCAs (and/or HUD Field Offices) about 
the upcoming PBV projects that do not include LIHTCs so HCAs can 
confirm whether they can perform the SLRs.

II. Subsidy Layering Review

A. Definitions

    Housing Credit Agency: For purposes of this notice, an HCA is a 
state housing finance agency or other state agency defined by Section 
42 of the Internal Revenue Code of 1986. HCAs are sometimes referred to 
by other names, such as State Housing Finance Agencies or State Housing 
Corporation. A participating jurisdiction under HUD's HOME Investment 
Partnerships program (see 24 CFR part 92) may also serve as an HCA.
    Mixed-finance development: Development or modernization of public 
housing pursuant to 24 CFR 905 Subpart F, where public housing units 
are owned by an entity other than a PHA.
    Other government assistance: Any loan, grant, guarantee, insurance, 
payment, rebate, subsidy, tax credit, tax benefit, or any other form of 
direct or indirect assistance from the Federal government, a State, or 
a unit of general local government, or any agency or instrumentality 
thereof.

B. Requesting a SLR for a PBV Award

    When a PHA selects a project that is either new construction or 
rehabilitation, as defined in 24 CFR 983.3, for a PBV award, and the 
project will include forms of government assistance other than PBVs, 
the PHA must request an SLR. PHAs request an SLR through their local 
HUD Field Office or, if eligible, through a participating HCA. A list 
of participating HCAs is posted and updated periodically on the Housing 
Voucher Financial Management Division (FMD) website, found at: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fmd. The 
participating HCA may charge a fee to perform the SLR, which the PHA 
may pay using Administrative Fees or Administrative Fee reserves.
    The PHA is responsible for collecting all required documentation 
for the SLR from the project owner. A list of required documentation is 
included in Appendix A. If after the initial submission new information 
becomes available, the PHA is responsible for submitting updated 
information to HUD or the HCA. The PHA maintains a project file with a 
complete set of the required documents. As part of the project 
selection process and application for PBVs, the project owner must 
disclose all HUD and/or other Federal, State, or local government 
assistance committed to the project, as well as other government 
assistance, using Form HUD 2880 (even if no other government assistance 
is received or is anticipated). If PBV is the only government 
assistance, an SLR is not required. Whether the PHA or HCA performs the 
SLR, the PHA must confirm that no form of disclosed assistance renders 
the project ineligible for PBV assistance and does not violate 24 CFR 
983.54.
    The owner must inform the PHA if any information changes during or 
after the application process, either by the addition or deletion of 
other government assistance. The project owner must provide revised 
information to correct the earlier submissions to reflect the new 
information. If at any time during or after the application process, 
the owner receives supplemental HUD or new government assistance for 
the project that results in changes in project financing, or changes in 
the number of PBV units, the owner must submit such changes to the PHA 
and the PHA must notify HUD or the HCA .\3\ The SLR application should 
not be submitted to HUD until all financing of the project has firm 
commitments from all lenders. The AHAP requires that the owner disclose 
to the PHA information regarding any related assistance from the 
Federal government, a State, or a unit of general local government, or 
any agency or instrumentality thereof, that is made available or 
expected to be made available with respect to the contract units.
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    \3\ 24 CFR 4.11.
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    The PHA may not enter into the AHAP with the owner until the 
environmental review is completed and the PHA has received the 
environmental approval pursuant to 24 CFR 983.153(b). At the time of 
initial submission of the SLR request, the PHA submits evidence that a 
request for a 24 CFR part 58 review is submitted to the responsible 
entity, or a 24 CFR part 50 review is submitted to the Field Office.

C. SLR Analysis and Safe Harbor Standards

    When undertaking an SLR, HUD reviews both the development and 
operating costs of a project to determine whether costs are within a 
reasonable range, taking into consideration the project's size, 
characteristics, location, costs, financing, and risk factors. Costs 
that fall within acceptable safe harbor standards, as identified below, 
may move forward without further justification. If costs exceed safe 
harbor standards, then additional justification and documentation are 
required to justify the costs based on risk factors, and HUD approval 
is required.
    If the review is by an HCA, project costs exceeding the safe harbor 
standards must be consistent with the HCA's published qualified 
allocation plan.
(A) Development Standards:
    i. General Contractor Fees: The safe harbor standard is based on 
hard construction costs. The maximum allowable combined contractor fee 
is fourteen percent (14%) of the total for hard construction costs. For 
example, if construction costs are $100,000, the safe harbor amount is 
$14,000:

 Builder's General Requirements: 6% of construction contract 
amount
 Builder's Overhead: 2% of construction contract amount
 Builder's Profit: 6% of construction contract amount

    ii. Developer Fee: The safe harbor standard is a maximum of 15 
percent. For projects combining public housing units and PBV units in a 
Mixed-Finance project, safe harbors are 9 percent, requiring no 
justification, above 9 percent and up to 12 percent, may be approved 
with justification. Fees over 12 percent may be approved if the PHA 
receives the amount over 12 percent and it is restricted for project 
costs or future phases as described in the ``Cost Control and Safe 
Harbor Standards for Rental Mixed-Finance Development,'' dated April 9, 
2003, or any successor document. See Section D on Mixed Finance 
Projects below.
(B) Operating Standards: The maximum initial term for a PBV HAP 
contract is 20 years pursuant to Section 8(o)(13)(F) of the 1937 
Housing Act as amended by HOTMA, although the initial terms for other 
funding sources may be less. SLR requests must include an operating pro 
forma that reflects each year of the HAP contract initial term. All 
assumptions for income, expenses and debt must be clearly identified. 
Both the Debt Coverage Ratio (DCR) and cash flow are analyzed on a 
year-by-year basis. If a project has no permanent debt (e.g., Grants), 
an Expense Coverage Ratio will be analyzed.
    i. Debt Coverage Ratio: HUD and HCAs analyze the PBV development's

[[Page 15445]]

projected DCR both on a yearly basis and trended over the term of the 
proposed subsidy period as an indicator of overall project health. As a 
HUD metric for PBV purposes, the minimum DCR is 1.10 and the maximum is 
1.45. The DCR for each year is determined by dividing the net operating 
income for that year by the amount of the debt service for that year. 
Factors such as operating cost increases, rent increases, project size, 
unit and income mix, and vacancy rates affect net operating income. 
Therefore, a trending analysis is also used to evaluate the DCR over 
time and to determine whether the amount of assistance is excessive. 
HUD recognizes that some projects may have higher upfront DCRs since 
owners may frontload debt service to free up cash flow later in the 
project period for higher anticipated operating expenses, or that some 
projects may have higher DCRs in later years due to planned changes in 
financing costs, interest rates, or partnership transfers. If a project 
has an overall trending DCR outside the 1.10 to 1.45 range, the project 
may have too much government assistance. If a project DCR trends 
outside the range for an individual year, but has an overall trending 
DCR within the range, HUD will require justifications from the owner or 
PHA to understand the project's assumptions and yearly deviations. If a 
project has no hard debt, it must demonstrate an Expense Coverage Ratio 
(Gross Income divided by Total Operating Expenses) of no less than 1.10 
and no higher than 1.45.
     Net operating income is defined as total operating income 
minus total operating expenses. The net operating income for a project 
must cover all repayable debt over the life of the HAP contract.
     Operating expenses should be trended at a consistent fixed 
rate between 1 percent and 3 percent per year for the first 5 years and 
3 percent thereafter. Justification for increases above 3 percent must 
be provided.
     Rent increases should be trended yearly at a consistent 
fixed rate between 2 percent and 3 percent per year. Justification is 
required for increases outside this range.
     Vacancy rates must not exceed 7 percent.
     Debt service is defined as the funds required to make 
payments on all non-forgivable loans, including any existing debt on 
the property. Debt service does not include forgivable/soft loans, non-
repayable grants, non-repayable Federal, State, or local assistance, 
deferred developer fees, financing fees, asset fees, partnership fees, 
investor fees, compliance fees, management fees, capital contributions, 
tax concessions, or tax credits.
    If the projected DCR remains between 1.10 and 1.45 during the 
initial term of the HAP contract, then it is assumed the project has 
enough cash flow to pay operating expenses and amortized debt, and that 
the amount of government assistance is not excessive. HUD will require 
adjustments if the projected DCR or Expense Coverage Ratio in any one 
year falls below 1.10 and continues to remain below 1.10 for a series 
of subsequent years, as cash flow would not be enough to ensure stable 
operations. Likewise, HUD will require adjustments if the projected DCR 
exceeds the maximum of 1.45 in any one year and continues to remain 
above 1.45 for a series of subsequent years.
    ii. Cash Flow: For any given year of the project's operating pro 
forma, cash flow may not exceed ten percent (10%) of total operating 
expenses. Cash flow is defined as net operating income minus all 
required debt service.
     If all or a portion of the developer fee has been deferred 
and is owed, the face value amount of the deferred developer fee may be 
deducted from cash flow. Accrued interest on the deferred fee may not 
be deducted.
     Operational and replacement reserves may be deducted from 
cash flow when reserves are adjusted by a consistent amount each year.
     No further adjustments to cash flow are permitted beyond 
deferred developer fees, operational reserve contributions and 
replacement reserve contributions.
    If in any given year the annual cash flow is greater than ten 
percent of total operating expenses and it remains above 10 percent, it 
is assumed the cash generated from the government assistance is greater 
than is necessary to make the project feasible. Therefore, adjustments 
must be made by the project owner to reduce cash flow to 10 percent or 
less of operating expenses. If the owner declines, HUD will reduce PBV 
rents or the number of PBVs, so that the project complies with the 10 
percent requirement.

D. Requesting a SLR for a Mixed-Finance Project

    For Mixed-Finance projects that also include PBVs, the SLR is 
handled as part of the Mixed-Finance project review process without a 
separate PBV SLR review. SLRs for Mixed-Finance projects are only done 
by HUD and may not be done by an HCA. Mixed-Finance reviews are done by 
HUD's Office of Public Housing Investments (OPHI) at HUD Headquarters. 
This provision also applies to Mixed-Finance projects with PBVs that 
are undertaken as part of the Choice Neighborhoods Grant Program, as 
well as Choice Neighborhoods projects that have PBVs, but no public 
housing. This includes MTW local nontraditional development (LNTD) 
proposals. OPHI prepares the SLR as part of the project review process 
without a separate PBV SLR review.
    As it relates to the PBVs, Mixed-Finance projects must comply with 
the SLR standards identified above in the Notice. In addition to this 
review, the project will also be reviewed to assure compliance with the 
provisions of 24 CFR 905 Subpart F, and other applicable guidance, 
including the following:
     The ``Cost Control and Safe Harbor Standards for Rental 
Mixed-Finance Development,'' dated April 9, 2003, or any successor 
document.
     Total Development Cost (TDC) and Housing Construction Cost 
(HCC) limits imposed on the project, pursuant to HUD Notice PIH-2011-38 
or successor notice.
     The HUD Pro Rata Test, which assures that the proportion 
of HUD public housing funds committed to development of the project 
does not exceed the proportion of public housing units in the project. 
For example, if there are 120 units in the project and 50 are public 
housing, 42 percent of the units are public housing. Therefore, the 
amount of public housing funds contributed to the development of the 
project may not exceed 42 percent of the development budget, including 
hard and soft costs.
     HUD will review the amount of LIHTC equity to be invested 
in the project to ensure that the sale of LIHTCs results in an amount 
of net tax credit equity that is consistent with amounts generally 
contributed by investors to similar projects under similar market 
conditions, and that the amount is not less than 51 cents for each 
dollar of tax credit allocation awarded to a project. If the project 
receives 51 cents or less of LIHTC equity or does not receive a market 
rate of equity, it is subject to additional review to reassess the 
project's fees and costs.

E. SLR Outcome

    (A) HUD: If HUD completes the SLR and determines the PBV assistance 
complies with the standards set in this Notice, where the PBV 
assistance will not result in excessive government subsidy, HUD will 
certify compliance pursuant to 24 CFR 4.13 and the local HUD Field 
Office will notify the PHA in writing.
    If HUD completes the SLR and determines that the amount of

[[Page 15446]]

government subsidy, including the PBV assistance, is excessive, HUD 
notifies the PHA. The notification includes a recommendation to reduce 
the amount of PBV assistance or a determination that PBV assistance 
cannot be provided. Once the PHA receives HUD's decision, the PHA must 
notify the owner in writing of the outcome and work with the owner to 
restructure, as needed. Revised materials must then be resubmitted to 
the HUD Field Office for review.
    (B) HCA: If an HCA completes the SLR and determines that PBV 
assistance complies with the above standards of this notice and does 
not result in excessive government subsidy, the HCA must notify the PHA 
and submit a certification to HUD at [email protected] with a copy to the 
Director of the local HUD Office of Public Housing (https://www.hud.gov/program_offices/public_indian_housing/about/field_office) 
stating that the PBV assistance to be provided is in accordance with 
HUD SLR guidelines in this Notice and that a determination has been 
made that it does not result in excessive government subsidy. The AHAP/
HAP contract may then be executed if the environmental approval is 
received. If the SLR is performed by an HCA, subsequent approval of the 
SLR by HUD is not required. The HCA certification must include the 
documents outlined in Section III. See Appendix C for a sample HCA 
certification letter and Appendix A for required information.
    If the HCA SLR determines the public assistance amount is 
excessive, the HCA must notify HUD, in writing, with a copy to the PHA. 
The notification will include either a recommendation to reduce the 
amount of PBV assistance or the amount of LIHTC allocation or a 
determination that PBV assistance cannot be provided. HUD will consult 
with the HCA and the PHA prior to issuing a final determination to 
adopt the HCA's recommendation or to revise it. The PHA must notify the 
owner in writing of the outcome and work with the owner to restructure, 
as needed. Revised materials must then be resubmitted to the HCA and 
the HUD Field Office for review.
    When a proposal for PBV assistance is contemporaneous with the 
application for or award of LIHTCs or other government approved funds 
and state resources, the required SLR may be fulfilled by the HCA (in 
accordance with Section 42(m)(2) of the Internal Revenue Code (IRC)) if 
such review substantially complies with the HUD SLR requirements and 
guidelines.
    (C) Mixed-Finance Projects: If HUD completes the SLR and determines 
the PBV assistance and other public housing assistance complies with 
the above standards of this Notice for Mixed-Finance projects and thus 
does not result in excessive government subsidy, HUD will certify 
compliance pursuant to 24 CFR 4.13 and notify the PHA.
    For projects that fail to comply, HUD will notify the PHA, which 
must (i) work with the owner to restructure the project so it complies 
with the above standards for Mixed-Finance projects and resubmit the 
revised documentation to HUD for approval, or (ii) provide sufficient 
justification to HUD to allow HUD to approve a variation(s) from the 
above standards.

F. SLR Timing

    In accordance with program regulations at 24 CFR 983.55, a PHA may 
not execute an AHAP contract until after the SLR is completed and 
approved by HUD or the HCA. The AHAP also may not be executed until 
there is a completed environmental review (ER) and written approval by 
the responsible entity or HUD, pursuant to 24 CFR part 50 or part 58 
and PIH Notice 2016-22. The local HUD Field Office must receive the 
completed SLR and either approve the Request for Release of Funds or 
complete a part 50 environmental review prior to notifying the PHA that 
it may execute the AHAP. The PHA may request an SLR and environmental 
review simultaneously. The Field Office confirms to the FMD and/or the 
HCA that the ER process is complete.
    If the owner reports to the PHA the addition of any other 
government assistance before or during the AHAP contract when no SLR 
was initially required because the project had not received and did not 
anticipate receiving other government assistance, then an SLR is 
required to be requested by the PHA at the time of the owner's report.

III. Housing Credit Agency Participation and Certification

    State HCAs are state-chartered authorities established to assist 
and meet the affordable housing needs of their states' residents. 
Housing Credits (LIHTC, Historic Tax Credits, etc.), Housing Bonds, and 
HOME Investment Partnerships (HOME) are the federally authorized 
programs at the center of HCA activity within the states. Through these 
programs and other Federal and State resources, HCAs have initiated 
hundreds of housing programs, rental, special needs housing and even 
homeownership. Prior to issuance of this notice, HUD had delegated SLRs 
to authorized HCAs (that submitted an intent of participation to HUD 
for approval) for proposed PBV projects that include LIHTCs as part of 
the proposed financial assistance. (HCAs were ordinarily designated for 
the purpose of allocating and administering the LIHTC program under IRC 
Section 42). HUD is herewith expanding the authority to participating 
HCAs to conduct SLRs in cases where LIHTCs are not included, but other 
government assistance is included. Currently 31 states have a HUD-
approved HCA; the remaining states may seek HUD approval to conduct 
SLRs for PBV projects by submitting a letter to HUD notifying HUD of 
their intent to participate. Appendix B contains a sample letter.
    Pursuant to the requirements outlined herein, as well as the 
Memorandum Of Understanding (MOU) between participating HCAs and HUD, 
HCAs are required to provide notification to the FMD through the FMD 
mailbox of any SLRs approved on HUD's behalf by no later than 30 days 
from the date of authorization. Notifications of approval must contain 
the following documentation:

 Copy of the Signed HCA Certification as shown in Appendix C
 The HCA's Internal Recommendation and Sign-off
 The Developer's Disclosure of Sources and Uses of Funds
 The Developer's Operating Pro Forma Considered
 Copy of the PBV Commitment/Award Letter
 HUD Form 2880, and
 Rent Information and Project Summary. The information on these 
fields is collected for reporting purposes only.
    a. Project Name and Address
    b. PHA name and code
    c. Field Office name and code
    d. HCA Name
    e. PBV Type: Rental Assistance Demonstration (RAD), Veterans 
Assistance and Supportive Housing (VASH), and/or Regular
    f. Tenant type: Elderly, Disabled, Homeless, Low-Income Families, 
and/or Veteran.
    g. Is the Project New Construction or Rehabilitation?
    h. Amount Per Dollar of Syndication Proceed
    i. Number of PBV Units Approved by Bedroom Size
    j. Debt Coverage Ratio or Expense Coverage Ratio (if applicable):__
    k. Project meets Cash Flow Criteria (Y/N)

[[Page 15447]]

IV. Overview Chart

    The following chart summarizes the types of projects that require 
an SLR, the entity authorized to perform the SLR and the required 
certification. 102(d) Certification is the owner's certification of no 
additional government funding using form HUD 2880.

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                                                            102(d)
  Type of project and scenarios      SLR reviewer        certification
                                                           required?
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PBV subsidy without LIHTC.        HCA or HUD *......  If by HCA,
 However, project is new                               certification not
 construction or rehabilitation,                       required.
 as defined in 24 CFR 983.3,                           Otherwise, HUD
 with 2 or more forms of other                         certifies.
 government assistance.
PBV subsidy with LIHTC, new       HCA or HUD........  If by HCA,
 construction or rehabilitated                         certification not
 project.                                              required.
                                                       Otherwise, HUD
                                                       certifies.
PBV existing housing, as defined  No SLR required...  No.
 in 24 CFR 983.3.
PBV new construction or           No SLR required...  No.
 rehabilitated housing, but PBV
 is the only form of government
 assistance.
Mixed-finance projects, with or   HUD...............  Yes.
 without LIHTC, with or without
 PBV, with other forms of
 government assistance.
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* PHAs may request that HUD perform the SLR if the project does not
  include LIHTCs. If the PHA does not request that HUD perform the SLR,
  the Field Office will refer the SLR request to a participating HCA.

V. Monitoring

    HUD performs quality control reviews of SLRs performed by 
participating HCAs by examining the following:

 If all required document and materials are available to the 
reviewer
 If values are correctly determined within the approvable range
 If values are above safe harbor standards
 If documentation was provided to justify higher costs
 If the subsidy was reduced correctly (if applicable)

    If any required documentation is not provided, or any portion of 
the review is performed incorrectly, HUD requires appropriate 
corrective action. When an SLR is performed by an HCA, subsequent 
approval of the SLR by HUD is not required.

VI. Paperwork Reduction Act

    The information collection requirements contained in this notice 
are currently approved by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) 
assigned OMB control numbers 2577-0169. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a valid control number.

Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.

Appendix A: PHA Submissions

    PHAs are responsible for collecting information from project 
owners and assembling it in an SLR request submitted to the local 
HUD Public Housing Field Office or HCA. SLR requests must contain 
the following information. Assembly using a binder is recommended. 
Incomplete submissions will be returned.

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     Required elements of an SLR application & checklist         Check
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1. Subsidy Layering Review request memorandum: Clearly
 identify the PHA, the PHA number, the Field Office number,
 the project's name, the project's total number of units,
 and the number of PBV units requested. For a sample
 memorandum see Attachment 1 of PIH Notice 2013-11 or newer
 version superseding it.....................................
2. Project Description: Short narrative identifying
 ownership, type of activity (rehabilitation or new
 construction), location (including county), the project's
 total number of units, number of PBV units requested, PBV
 type (RAD, VASH, regular), utility allowances, bedroom
 distributions, supportive services (if applicable) and
 residential population (participants experiencing
 homelessness, veteran, elderly, low-income families). The
 narrative should also identify any exceptions applicable to
 the project (e.g., number of PBV exceeding the Project
 Cap). The information on item 2 is collected for reporting
 purposes only..............................................
3. Accounting Statement of Sources and Uses of Funds:
 Identifying each source and indicate type (loan, grant,
 syndication proceeds, contributed equity). Sources
 generally include only permanent financing and grants. If
 interim financing or a construction loan is proposed,
 provide details in project description. Separately identify
 detailed uses, avoiding broad categories such as ``soft
 costs.'' Under acquisition costs, identify purchase price
 separately from related costs such as appraisal, survey,
 title, recording and legal fees. Include separate line
 items representing construction contract amount, builder's
 general requirements, builder's overhead, builder's profit,
 and total project costs. [Complete HUD Form 50156].........
4. Description of funding sources: Loans including
 principal, interest rate, amortization, term, and any
 accrual, deferral, balloon, or forgiveness provisions.
 Describe any lender, grantor, or syndicator requirements
 for reserves or escrows requirements. Describe if a lender
 receives a portion of the net cash flow, either as
 additional debt service or in addition to debt service.
 Identify the amount of LIHTC and include IRS form 8609.....
5. Commitment Letters: Lenders and other funding sources
 evidence their commitment to provide funding and disclose
 significant terms. Signed commitment letters, conditional
 commitment letters, loan agreements and grant agreements
 meet this requirement. However, proposal letters and
 letters of intent or interest do not meet this requirement.
6. Developer's Commitment Letter: Delineating any
 arrangements, contributions, donations, significant terms,
 or transfer of funds from the developer and/or
 participating partners such as deferred developer's fees,
 cash contributions, land donations and equity investments..
7. HOME Commitment Letter: (When applicable) Signed document
 clearly identifying requirements of the HOME designated
 units and intended rents...................................
8. Supportive Service Commitment: (When applicable) A signed
 Memorandum of Understanding that describes the type of
 services to be provided, frequency, terms of service and
 resident eligibility.......................................
9. Appraisal Report: Based on the ``as is'' value of the
 property, before construction or rehabilitation, and
 without consideration of any financial implications of tax
 credits or project-based voucher assistance. An appraisal
 establishing value after the property is built or
 rehabilitated is not acceptable unless it also includes an
 ``as is'' valuation. The appraisal date must be within
 eighteen months of the SLR submission......................

[[Page 15448]]

 
10. Completed HUD Form 50156: The form must include the
 Operating Pro Forma, construction and permanent budget,
 projected rental, commercial, and miscellaneous gross
 income, vacancy loss, operating expenses, debt service,
 operational reserves contributions, replacement reserve
 contributions, cash flow projections, debt service ratios;
 as well as income and expenses trended at a consistent
 percentage.................................................
11. Low-Income Housing Tax Credit Allocation Letter: Issued
 by the authorized tax credit allocation agency, identifying
 the amount of LIHTCs reserved for the project..............
12. Historic Tax Credit Letter: Issued by an authorized
 historic credit agency, disclosing the estimated historic
 tax credit amount awarded to a project located in a
 designated historical area.................................
13. Equity Contribution Schedule: If equity contributed to
 the project is paid in installments over time, provide a
 schedule showing the amount and timing of planned
 contributions..............................................
14. Bridge Loans: Providing details if the financing plan
 includes a bridge loan where equity contributions proceeds
 planned over an extended time can be paid upfront..........
15. Disclosure, perjury and identity of interest statement
 (Form HUD-2880) completed by the owner.....................
16. PBV award letter: Identifying the housing authority's
 approval of project-based voucher assistance for the
 project by number of units and bedroom distribution........
17. PHA rent certification letter: Documenting proposed
 contract rents, utility allowances, and gross rental
 amounts for assisted units. Include rent reasonableness
 documentation or comparability analysis as evidence of rent
 determination and certification............................
------------------------------------------------------------------------

Appendix B: HCA Notice of Intent To Participate

    U.S. Department of Housing and Urban Development, PIH Financial 
Management Division, Room 4232, 451 Seventh Street SW, Washington, 
DC 20410.
    By: Email: [email protected].
    Re: Intent to Participate on Subsidy Layering Reviews
    To Whom It May Concern:
    The undersigned is a qualified Housing Credit Agency (HCA) as 
defined under Section 42 of the Internal Revenue Code of 1986 and 
hereby notifies the United States Department of Housing and Urban 
Development (HUD) of our intention to conduct subsidy layering 
reviews (SLRs) pursuant to HUD's requirements for the purpose of 
ensuring the combination of assistance under the Section 8 Project-
Based Voucher (PBV) Program with other Federal, State, or local 
assistance does not result in excessive compensation. By signifying 
this notice, the undersigned hereby certifies that:
    Required personnel reviewed the statutes identified in Federal 
Register Notice (Insert new reference) Contracts and Mixed-Finance 
Development, and 24 CFR 983.55.
    The undersigned understands its HCA responsibilities and 
certifies it will perform SLRs in accordance with all present and 
future statutory, regulatory and HUD requirements. The undersign 
acknowledges participation continues unless and until HUD revokes 
this notice or the undersigned informs HUD, in writing with a 30-
day-notice of its decision to withdraw. Upon HUD approval, the 
undersigned shall immediately assume the responsibility of 
performing SLRs.
    Name of agency and address:
    Name, title, and address if authorized official
    Phone, FAX, and email:
    Date of execution:
    Transmit signed and dated notice of Intent to Participate as a 
PDF attachment to Miguel Fontanez at 
[email protected] with subject line 
identified ``Submission of Notice of Intent to Participate.'' For 
questions concerning the submission and receipt of the email, call 
the Financial Management Division at (202) 402-4212.

Appendix C: HCA Certification

    U.S. Department of Housing and Urban Development, PIH Financial 
Management Division, Room 4232, 451 Seventh Street SW, Washington, 
DC 20410.
    By: Email: [email protected].
    Re: Certification of Subsidy Layering Review
    To Whom It May Concern:
    For purposes of providing of Section 8 Project-Based Voucher 
(PBV) Assistance authorized pursuant to 42 U.S.C. 8(o)(13), Section 
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008 
(HERA), Section 102 of the Department of Housing and Urban 
Development Reform Act of 1989, and in accordance with HUD 
requirements, all of which address the prevention of excess 
government subsidy, I hereby certify that the PBV assistance is not 
more than is necessary to provide affordable housing after taking 
into account other government assistance for the following project:
    Name, address of project:
    Name, address of PHA:
    Phone, FAX, and email:
    Name, address of HCA:
    Date of HUD's approval of HCA's intent to participate:
    Name of Authorized HCA Certifying Official:
    Signature of Authorized HCA Certifying Official:
    Date:
    Transmit signed and dated SLR certification as PDF attachments 
to Miguel A. Fontanez at [email protected], with a copy to the 
Director of the local HUD Office of Public Housing: https://www.hud.gov/program_offices/public_indian_housing/about/field_office, with subject line identified ``SLR Certification-
Project Name, City, State''.
    For questions concerning the submission and receipt of the 
email, contact the Financial Management Division at 
[email protected].

[FR Doc. 2023-05045 Filed 3-10-23; 8:45 am]
BILLING CODE 4210-67-P