Acquisition and/or Development of Real Property Never Subject to a Contract for Financial Assistance

(1) Pursuant to M.G.L. c. 121B, § 31 an LHA may submit to the Department an application for an affordable housing development utilizing private or mixed public and private financing on real property which is owned or which is to be acquired by the LHA but which is not and never has been subject to a contract for financial assistance between the LHA and the Department. Such application for approval shall not be required for an acquisition or development to be financed by a state or federal affordable housing agency or program. If an application is required the form and contents of the application shall be prescribed by the Department. Within 60 days of receipt of a complete application the Department shall approve such application provided that it shall have made the following findings: (a) The proposal for an affordable housing development appears capable of achievement. 4.13: continued (b) The affordable housing to be constructed will be deed restricted to occupancy by low or moderate income households at affordable rents or at affordable sales prices. Any deed restrictions shall specify the term for which the housing shall be affordable. The term may be perpetual or for a lesser term of years. The purpose of the deed restriction shall be to ensure affordability of the housing during the term. (c) The tenant share of the rent for such an affordable housing unit shall be: 1. no more than the percentage of monthly net household income which is specified in 760 CMR 6.04(1)(b) with net household income of the tenant household determined in the manner specified in 760 CMR 6.05: Determination of Gross Household Income and Net Household Income; or 2. a rental amount which shall not in any event exceed 30% of 80% of area median household income adjusted for household size as determined by HUD; or 3. an amount determined as an allowable rent by a state or federal affordable housing program. (d) Sales prices for such affordable housing shall be no more than a low or moderate income household of appropriate size could afford using reasonable assumptions determined by a state or federal low or moderate income homeownership program. (e) Adequate provision has been made so that the lot or lots of land on which the housing will be constructed will be suitably subdivided from any other land of the LHA which is subject to a contract for financial assistance. (f) Adequate provision will be made, insofar as reasonably possible and financially feasible, to protect against loss of affordability in the event of foreclosure of any mortgage. (g) Public construction and prevailing wage requirements, insofar as applicable, will be complied with in the construction of the housing. (h) Tenant or homeowner selection procedures, including residency preferences, shall be fair and reasonable and will not contravene any applicable state and federal anti- discrimination laws any state or federal fair housing laws. (2) The Department shall notify the LHA in writing whether an application is incomplete or whether it has been approved, approved with conditions, or denied within 60 days from the date of the Department’s receipt of the application. Any housing approved by the Department under 760 CMR 4.13 shall not be subject to any contract for financial assistance for or in connection with a state-aided housing project under M.G.L. c. 121B between the LHA and the Department, shall not be a housing project eligible for subsidy under M.G.L. c. 121B, § 32, and shall not be subject to regulation by the Department as such. 4.14 Transfer of Surplus Land Never Subject to a Contract for Financial Assistance (1) An LHA may transfer surplus real property which is not and never has been subject to a contract for financial assistance between the Department and the LHA. Approval by the Department shall not be required for such a transfer. The LHA shall comply with all applicable requirements of law for disposition of real property by a public entity in any such transfer. 4.15 Transfer of Existing Public Housing Developments to Controlled Affiliates for Substantial Rehabilitation (1) Pursuant to M.G. L. c. 121B, §§ 31 and 34 an LHA may submit to the Department an application for the transfer of a housing project, which is in need of substantial rehabilitation, to a controlled affiliate of the LHA for purposes of securing additional financing, which in conjunction with any financing available from the Department, is necessary for paying the cost of substantial rehabilitation of the housing project. The form and contents of the application shall be prescribed by the Department. In connection with any development by a controlled affiliate under 760 CMR 4.15 the controlled affiliate shall enter into a binding legal contract and land use restriction with the LHA and the Department which requires: (a) compliance by the controlled affiliate with the provisions of M.G.L. c. 21B and 760 CMR 4.00, 5.00: Eigibility and Selection Criteria and 6.00: Ocupancy Standards and Tenant Participation for State-aided Housing in the same manner and to the same effect as if it were an LHA, subject to any waivers in 760 CMR 4.00 given by the Department to the controlled affiliate as may be necessary for securing financing; 4.15: continued (b) appropriate remedies for the Department, the LHA, investors and lenders in the event that the controlled affiliate fails to meet its obligations to the Department, the LHA, investors or lenders, including, but not limited to, enforcement rights by the Department over the controlled affiliate pursuant to M.G.L. c. 121B and the Department’s regulations just as if the controlled affiliate were an LHA. Within 120 days of receipt of a complete application, if the Department shall find that a transfer to a controlled affiliate is reasonably necessary for securing necessary financing, shall have made the findings hereafter specified and shall find that the proposed legal documents satisfy the requirements of 760 CMR 4.15, it shall approve the transfer, and the LHA may deed the housing project and land associated therewith and necessary therefor to the controlled affiliate; and (c) appropriate remedies for the controlled affiliate, investors and lenders, subject to the approval of the Department and LHA, in the event that any annual subsidy which is due under a contract for financial assistance is reduced or eliminated and other financial measures to remediate the deficit are unsuccessful. Such measures shall include, when feasible: reasonable reductions in operating expenses; accessing debt service reserves, other reserves or surplus cash flow; refinancing project debt; seeking alternative operating subsidy funding; and seeking other funds to reduce project debt. Remedies shall be designed to eliminate operating deficits and may include adjustment in the target mix of incomes of resident households. (2) The Department shall not approve such an application unless it shall have found that the housing project is in need of substantial rehabilitation; that the costs of substantial rehabilitation cannot be wholly financed by the Department; that the controlled affiliate is adequately financed and properly constituted; that the LHA has effective legal control of the controlled affiliate; that the applicant has complied with the tenant participation requirements of 760 CMR 6.09(3)(g); that the financial plan for substantial rehabilitation, including any new or replacement units, which will be part of the housing project, is sound and likely to be accomplished; that the financial plan for new units which will not be part of the housing project is sound and likely to be accomplished; and that any lien or mortgage on the land of the housing project or other affordable housing shall be reasonably necessary and shall be subordinate to the requirements set out in 760 CMR 4.15(1)(a). (3) With respect to financing, including any necessary annual subsidy payments, the LHA, the controlled affiliate and the Department shall enter into a binding legal contract for financial assistance or an amendment to a contract for financial assistance which shall specify the financial assistance, including annual subsidy, to be given by the Department, its uses and remedies for misuse. In conjunction with a substantial rehabilitation of a housing project on land transferred to a controlled affiliate, the controlled affiliate shall be subject to the same procedures for securing approval of plans for substantial rehabilitation as if it were a housing authority. It may seek approval of new or replacement units which will become part of the low rent housing project which shall thereafter be administered as part of the project. The controlled affiliate may also seek approval of new affordable housing or new market-rate housing units which will not be a part of the housing project. Any new market-rate units shall be approved by the Department as reasonably necessary financially for the substantial rehabilitation or operation of the housing project and shall be no more than 25% of the total of both affordable housing units and market- rate housing units, or such greater percentage as the Department determines is financially necessary. The requirements of 760 CMR 4.11 shall be applicable to any new housing units to be constructed insofar as they will not be part of the housing project. A housing project so rehabilitated by a controlled affiliate shall be the real property of the LHA for purposes of its exemption from real estate tax.