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109.00.10-IV. The NSP Rental Housing Program

AR ADC 109.00.10-IVArkansas Administrative Code

West's Arkansas Administrative Code
Title 109. Development Finance Authority
Division 00.
Rule 10. Neighborhood Stabilization Program
Ark. Admin. Code 109.00.10-IV
109.00.10-IV. The NSP Rental Housing Program
Currentness
Recipients utilizing funds in the NSP Rental Housing Program must closely adhere to all NSP regulations, as well as to ADFA's program-specific guidelines and adopted policies. Notwithstanding these requirements, program participants may structure their development and application for NSP Program funds to meet the specific rental needs of their community.
A. Eligible Applicants
ADFA will accept applications for projects up to the September 1, 2009 application deadline. Multiple NSP applications may be submitted for funding. ADFA will determine in its sole and absolute discretion if the applicant has the necessary capacity to complete any additional NSP applications submitted. Additional NSP applications submitted by eligible applicants will be approved only if the applicant exhibits the capacity to successfully complete all approved projects. ADFA will accept applications for rentals at a minimum of five (5) units, from entitlement communities, other units of local government, nonprofit organizations, or for-profit entities.
Eligible applicants may receive technical assistance by attending an information/training session prior to submitting an application. Sessions will address NSP Program and ADFA guidelines as well as application procedures. Applicant eligibility will be based on the designated responsible entity submitting the application. An eligible designated responsible entity is the entity responsible for project development, but may include all of its related affiliated entities.
B. Amount of NSP Funding Per Applicant
Each eligible applicant must request at least one hundred thousand dollars ($100,000). The maximum amount that can be requested for a developer's fee is ten percent (10%) of the final allocation amount. The allocation is generally meant to be used as gap financing and is not intended to fund an entire development.
C. Eligible Activities and Projects
ADFA will accept applications in the NSP Rental Housing Program in the following eligible activity categories:
1. Acquisition - Acquisition of abandoned and foreclosed rental properties for the purposes of providing housing to NSP income eligible tenants.
2. Rehabilitation - Rehabilitation of abandoned and foreclosed rental properties for the purposes of providing housing to NSP income eligible tenants. This activity would be combined with acquisition of abandoned and foreclosed properties.
3. Demolition of Blighted Structures - Demolition of blighted structures to be replaced by units for rent by NSP income eligible tenants. This activity must be combined with acquisition of abandoned or foreclosed properties.
4. Reconstruction - Reconstruction of abandoned and foreclosed structures for the purposes of providing housing to NSP income eligible tenants. This activity would be combined with acquisition of abandoned and foreclosed properties.
5. New Construction - New construction of rental properties for the purposes of providing housing to NSP income-eligible homebuyers. The property upon which the structures are constructed must be either foreclosed or vacant, as defined by NSP.
Each application must include a minimum of five (5) units.
All projects must aim to re-inhabit abandoned or foreclosed properties through their acquisition, rehabilitation, reconstruction, new construction, or some combination thereof. Eligible projects include multiple buildings on a single site as well as single or multiple units on scattered sites. Units may be on scattered sites but must be within the same jurisdiction.
ADFA will require all proposals to include no less than 25 percent of NSP funding requested to be designated for households at or below 50 percent of area median income. NSP funds may be used for a mixed-income development provided that a pro rata of NSP-eligible units are occupied by households meeting the income limits of the NSP. Common area costs must be prorated based upon the number of NSP-assisted units and non-NSP-assisted units.
A building that is designed, in part, for other than residential housing may qualify as affordable housing under the NSP as long as NSP funds are used for the residential portion and those units meet the rent and income limitations of the NSP (see F. Rent Limits and Project Affordability for more information.)
D. Eligible Costs
NSP Program funds may be used for certain development costs as dictated by 24 CFR Part 570 and outlined below:
1. Hard Costs - Eligible hard costs are the actual cost of constructing or rehabilitating housing. These costs include the following:
a. Construction, rehabilitation, or reconstruction of affordable housing units
b. Site improvements (including utility connection costs, but not the costs to provide utilities to the site)
c. Demolition (must be done in conjunction with a specific affordable housing project)
d. Acquisition
2. Soft Costs -Eligible soft costs must be “usual, customary, reasonable, and necessary” and may include the following:
a. Finance related costs, i.e., credit reports, title reports and updates, appraisal fees, surveys, origination fees and discount points, and construction interest
b. Current market study (not more than six (6) months old)
c. Project audit costs
d. Professional services (architectural, engineering, and other services provided for a specific project; otherwise, the professional service costs may be considered to be administrative costs)
e. Consultation fees (not associated with organizational startup)
DEVELOPERS CANNOT HIRE THEMSELVES AS CONSULTANTS ON ANY NSP-FUNDED PROJECT OTHER THAN ON A THIRD-PARTY BASIS.
3. Relocation Costs - The cost of permanent or temporary relocation of tenants, as required by the URA.
4. Bridge Loans - Interim construction loans used to finance the NSP-assisted development with prior notification to ADFA.
Note: While ADFA does not have a predetermined, specific limit on cost per square foot, the developer should be aware that the per unit cost per square foot will be closely scrutinized for reasonableness, and an application for funding will be denied if costs are deemed unreasonable.
5. Project Delivery Costs - Any nonprofit entity or local government receiving a NSP allocation may include project delivery costs (in an amount not to exceed 10% of the final NSP allocation) in the development budget. Project delivery costs are eligible only for costs directly associated with the NSP-funded development. A certification of costs must be submitted with all requests for project delivery costs. Participants must submit an itemized budget for project delivery costs as part of the initial application.
Proper documentation is essential for the payment of project delivery cost fund requests. Project delivery costs must be supported by source documentation maintained on tile by the recipient of NSP funds. Requests for payment of project delivery costs must be verified by the Certification of Costs (signed by the recipient) and not by the supporting documentation maintained by the recipient. Supporting documentation will be reviewed and verified by ADFA staff performing compliance and monitoring reviews.
Acceptable supportive documentation includes:
• A copy of a detailed bill highlighting the costs to be reimbursed to the NSP participant. The detailed bill should, at a minimum, include vendor identification, a description of the services received, the quantity (hours, units, etc.), and the price for services received. The detailed bill must be substantiated by a cancelled check, a copy of the bank statement or other proof of payment
• No handwritten invoices will be accepted.
• All invoices must have an authorized signature of the NSP participant's Executive Director, or his or her designee, approving the payment and verifying that the services were received and satisfactorily performed, the month the cost is being paid, dated, and cancelled to prevent the invoice from being paid twice.
• ADFA will reimburse salaries which are “reasonable and customary” for support personnel (e.g., clerical, temporary employee, etc.) of the NSP participant directly providing project delivery costs to the affordable housing being assisted at a rate commensurate with their regular hourly wages.
• A copy of any contracts for professional services, (e.g., consultants, architects, contractors, etc.), if applicable, must be provided in the initial application outlining the services to be rendered, the cost of the proposed services, and the proposed payment schedule or terms..
• Satisfactory documentation of fringe benefits being paid. Examples of fringe benefits include the following:
○ Vacation/Sick/Holiday/Compensatory Time
○ Pensions
○ Veteran's Benefits
○ Group Insurance
○ Life Insurance/Long-term Disability
○ Accidental Death and Dismemberment Insurance
○ Profit Sharing Plan
○ Association/Union Dues
The use of prorated payment percentages is acceptable and must be outlined in the initial application as well as each billing statement submitted for reimbursement. The applicant must provide the sources of other funds used to pay project delivery costs, if any.
E. Forms of Financial Assistance
ADFA caps the maximum subsidy for rental projects at $132,000 per unit or $158,400 per unit for properties listed on the National Register of Historic Places.
NSP allocations for rental housing activities will be in the form of a loan at 0% interest amortized over the period of affordability. The minimum affordability period may be extended at the owner's election.
F. Rent Limits and Project Affordability
All NSP Program funds must benefit households with incomes no greater than 120% of the area median income, adjusted for family size. Rents in all NSP-assisted units must be set at “affordable rents,” which are defined as follows:
○ Low HOME Rent Limits: Tenant households with incomes < 50% of the AMI
○ Tenant households with incomes between 50 and 60% of AMI: High HOME Rent Limits
○ Tenant households with incomes between 60 - 120% of AMI: HUD Fair Market Rent Limits
These rent limits and area median incomes are recalculated on an annual basis by HUD.
All NSP-assisted projects must remain affordable to and occupied by LMMI households within the above listed rent limits for a period of time that varies in accordance with the level of NSP assistance. The table below provides the minimum period over which NSP-assisted units must remain affordable.
NSP Assistance Per Unit
Minimum Affordability Period
Under $15,000
5 Years
$15,000 - $40,000
10 Years
Over $40,000
15 Years
New Construction or Acquisition of Newly Constructed Rental Housing
20 Years
Rent, occupancy, and affordability requirements will be enforced with AFDA-approved covenants, mortgages, or deed restrictions running with the property. Specifically, rental property owners/managers will be required to document that the required percentage of units are occupied by LMMI households over the period of affordability. Income must be determined at a minimum, when a NSP-funded unit is occupied by a new tenant household (i.e., at unit turnover).
Where NSP Program funds are used in conjunction with HOME Investment Partnerships (“HOME”), Low Income Housing Tax Credits (“LIHTC”), United States Department of Agriculture (“USDA”) Rural Development funds or other financing programs, the more stringent project and occupancy regulations will apply.
G. Universal Design Standards
The following building design criteria must be included in all construction for all NSP-funded rental projects, in accordance with the Arkansas Department of Human Services' Arkansas Usability Standards in Housing: Guidance Manual for Constructing Inclusive Functional Dwellings (AUSH):
1. Seven percent (7%) of all residential rental units within the development must comply with the Level 5, “All-Inclusive” usability criteria as set forth in the AUSH. The AUSH is available on the internet at the following website address: www.studioaid.org. Under the “Design” link, click on “standards.”
2. Each unit that is required to meet the Level 5, “All-Inclusive” usability criteria set forth in the AUSH must have at least one bathroom with an “accessible roll-in” shower facility with minimum dimensions of 60″x34,″ or 42″ x 42″ if a corner shower facility.
3. All ground level residential rental units in any building and all residential units with elevator access in any building in the development must comply with the Level I, “Visitable” usability criteria as set forth in the AUSH.
4. All exterior and interior doors intended for passage must provide for a minimum clear opening of 34″.
5. All residential units in the development will have “closed-fist” operability throughout the unit (e.g., single handle door levers vs door knobs, push stick lighting and environmental controls, cabinet doors can be opened with a closed first, single handle faucets in bathrooms and kitchen).
6. All environmental controls must provide visual and tactile cues. For lighting, a “rocker” type switch is sufficient. For thermostats, a programmable and digital with raised buttons is required.
7. All primary entries, not in a breezeway, must have a minimum roof covering of 5′x 5′.
8. All primary entries must have entry pad measuring at least 5′x 5′.
9. All sidewalks must be at least 5′ wide.
H. Methods of Repayment
The standard loan terms and conditions for repayment of Rental Housing Program loans are to be evidenced by fully executed promissory notes. Promissory notes will be payable at a zero percent (0%) interest rate for a term coinciding with the NSP affordability period. Monthly or annual payments will become due and payable not later than one (1) year from the anticipated placed in service date shown on Schedule of Activities, included as Attachment B of the NSP Agreement.
I. Leveraging Requirements for Rental Development
Applications will receive additional points for leveraging NSP funds with other sources (i.e., private financing, HOME, USDA, etc.).

Credits

Adopted Aug. 27, 2009.
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 109.00.10-IV, AR ADC 109.00.10-IV
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