Title
Notice/Advertisement Title: Chapter 4565 Director's Rules
Contact Name: Jeremy Heater-Druhot
Contact Telephone Number: 614-645-8530
Contact Email Address: JRHeater-Druhot@columbus.gov
Body
Director of the Department of Development Rules Pursuant to Chapter 4565 - Affordable Housing and Community Reinvestment Area Incentive Policy
Table of Contents
1. Introduction 1
2. Income Qualification and Verification; Affordable Rent; Gross Annual Income 1
3. Fees 5
4. Reasonable Utility Expenses 6
5. Number of Affordable Housing Units 6
6. Default 8
7. Appeals 8
8. Monitoring Fees and Annual Report 9
9. Deadline to File Applications 9
10. Transition from 2018 to 2022 policy 9
11. Fee-in-Lieu Inflation Calculation 11
12. Columbus Housing CRA 11
13. Chapter 4565.13 Waiver Terms 11
14. Affordable Height Bonus 12
1. Introduction
This document provides interpretation and examples for the Residential Tax Incentive program as defined in Columbus City Codes Chapter 4565. Defined terms in this document shall have the same meaning as in Chapter 4565.
2. Income Qualification and Verification; Affordable Rent; Gross Annual Income
a. Tenant incomes are qualified at the time of initial application to lease the Affordable Housing Unit and are not required to be re-verified for the duration of the applicant’s occupancy of the same Affordable Housing Unit. This means that re-verification is not required:
i. at lease renewal;
ii. if another person(s) moves in, so long as the same Affordable Housing Unit is occupied by the original tenant, or
iii. when a tenant reaches age 18.
b. Income qualification is determined using standard verification procedures similar to market rate developments rather than HUD income verification procedures. Such verification measures may include:
i. Pay stubs;
ii. Pension;
iii. Social security;
iv. Tax return (most recent);
v. W-2s;
vi. Worker’s compensation;
c. Full-time students age 18 or older may qualify as tenants for Affordable Housing Units. Only the first $480.00 of employment annual income is counted toward household income. Further guidance is informed by IRC §42.
d. Household size for which an Affordable Housing Unit is designed is determined as follows:
|
Unit Type |
Household Size (Persons) |
|
Studio |
1 |
|
One bedroom |
1.5 |
|
Two bedrooms |
3 |
|
Three bedrooms |
4.5 |
|
Four or more bedrooms |
Determined by multiplying the number of bedrooms by 1.5 |
e. When the current lease term expires, rent may be adjusted upward to the then-applicable Area Median Income (AMI) limit, but is not required to be adjusted downward if the AMI limit goes down.
f. For Owner-Occupied Affordable Housing Units per Columbus City Code 4565.05, said initial occupancy shall be determined by either of the two options below. Documentation appropriateness is subject to the discretion of the Department of Development - Division of Housing:
i. The income as disclosed in the most recent year of tax returns, or other documentation to support sources of income such as social security; or
ii. Lender analysis of income, such as a Lender Application signed and dated by the applicant(s) and lender.
The annual cost of ownership shall be demonstrated by an analysis of
the borrower’s principal, interest, taxes, and insurance (PITI).
g. In the event the owner-occupant of an Owner-Occupied Affordable Housing Unit sells the property, the new owner-occupant must meet the requirements of Columbus City Code 4565.05. If the new homeowner fails to meet these requirements, the abatement shall be revoked.
h. Rental and homeownership cost limits are determined using the Home Program Rents published by HUD for the Columbus, OH HUD Metro FMR Area (<https://www.huduser.gov/portal/datasets/HOME-Rent-limits.html> using the 50% rent limit and multiplying to calculate the 60%, 100%, and 120% AMI figures as pertinent to the Development Project. Due to irregularities in calculating 80% AMI, the "Low Income" variable in HUD’s data is used. For convenience, charts calculating these metrics will be published by the Department of Development - Division of Housing separate from this document.
i. Rental and homeownership income limits are determined using the Income Limits Summary published by HUD for the Columbus, OH HUD Metro FMR Area (<https://www.huduser.gov/portal/datasets/HOME-income-limits.html>) using the 60% rent limit and multiplying to calculate the 60%, 80%, 100%, and 120% AMI figures as pertinent to the Development Project.
j. Example 1: For purposes of this example, assume the following:
A particular Development Project is required to provide 10 Affordable Housing Units for tenants with annual household incomes at or below 60% of AMI and 10 units for tenants with annual household incomes at or below 80% of AMI.
For a one bedroom Affordable Housing Unit the 60% AMI monthly rent limit is $1,225.20 and the 80% AMI rent limit is $ $1,633.60. For a one-person household, the 60% income limit is $45,780.00 and the 80% income limit is $61,050.00.
A tenant desiring to rent a one-bedroom Affordable Housing Unit in the Development Project as their principal residence, who is not a full-time student, has a gross annual income of $39,000.00. To qualify for one of the 10 Affordable Housing Units restricted to household incomes at or below 60% AMI, the gross monthly rent to be charged to the occupant for the one bedroom unit cannot exceed $1,225.20 less reasonable utility expenses as described in Section 4.
k. Example 2: For purposes of this example, assume the following:
A Development Project is required to provide 10 Affordable Housing Units for tenants with an annual household income at or below 60% of the AMI and 10 Affordable Housing Units for tenants with annual household incomes at or below 80% of AMI. For purposes of this example, assume the following:
For a two bedroom Affordable Housing Unit the 60% AMI monthly rent limit is $1,471.20 and the 80% AMI rent limit is $ $1,961.60. For a two-person household, the 60% income limit is $ $52,320.00 and the 80% income limit is $ $69,800.00.
Tenant A and Tenant B desire to rent a two-bedroom Affordable Housing Unit as their principal residence and Tenant B is a full-time student. Tenant A’s gross annual income is $48,000.00 and Tenant B’s gross annual income is $5,000.00. For purposes of Chapter 4565, Tenant A’s and Tenant B’s combined household income is $48,480.00, due to Tenant B being a full-time student, whose income is capped at $480.00. To qualify for one of the 10 Affordable Housing Units restricted to household incomes at or below 80% AMI, the gross monthly rent to be charged to Tenant A and Tenant B for the two bedroom Affordable Housing Unit is $1,961.60 less reasonable utility expenses as described in Section 4.
l. Example 3: For purposes of this example, assume the following:
A Development Project is required to provide 10 Affordable Housing Units for tenants with an annual household income at or below 60% of the AMI and 10 Affordable Housing Units for occupants with an annual household income at or below 80% of AMI. For purposes of this example, assume the following:
For a two bedroom Affordable Housing Unit the 60% AMI monthly rent limit is $1,471.20 and the 80% AMI rent limit is $1,961.60 For a one-person household the 60% income limit is $45,780.00 and the 80% income limit is $61,050.00. For a two-person household the 60% income limit is $ $52,320.00 and the 80% income limit is $ $69,800.00. For a three-person household the 60% income limit is $58,860.00 and the 80% income limit is $78,500.00.
Tenant A and Tenant B (who is Tenant A’s seventeen year old child) desire to rent a two-bedroom Affordable Housing Unit as their principal residence. Tenant A’s gross annual income is $48,000.00 and Tenant B’s gross annual income is $5,000.00. For purposes of Chapter 4565, Tenant A’s and Tenant B’s combined household income is $48,000.00, because seventeen year-old Tenant B’s income is not counted toward the household income. To qualify for one of the 10 Affordable Housing Units restricted to a household income at or below 80% AMI, the gross monthly rent to be charged to Tenant A and Tenant B for the two bedroom Affordable Housing Unit is $1,961.60 less reasonable utility expenses.
Three months after Tenant A and Tenant B occupy the Affordable Housing Unit, Tenant C moves into the same Affordable Housing Unit and is added to the lease. Tenant C’s gross annual income is $30,000.00. When the lease is renewed after the initial term, the gross monthly rent to be charged for the two bedroom Affordable Housing Unit cannot exceed the greater of $1,961.60 or the then-applicable AMI limit, less reasonable utility expenses as described in Section 4.
3. Fees
a. The following allowable fees are considered usual and customary, if charged to all Affordable Housing Units and market-rate in the Development Project:
i. Amenities;
ii. Application and processing (limited to $35.00);
iii. Athletic club membership set-up;
iv. Credit card processing;
v. Damage repair;
vi. Garage;
vii. Late payment;
viii. Lease violation;
ix. Lock changes;
x. Lost key card, key or garage remote;
xi. Non-sufficient funds fees;
xii. Parking;
xiii. Pet fees;
xiv. Processing;
xv. Security deposit;
xvi. Storage;
xvii. Unit reservation or hold
b. The following fees are not considered usual and customary and therefore are not allowed to be charged to Affordable Housing Units:
i. Cleaning (other than in connection with pet or condition of the unit at lease termination);
ii. Income qualification;
iii. Maintenance;
iv. Move in;
v. Redecorating;
vi. Washer dryer hookup access
c. Any other fees payable by tenants of the Affordable Housing Units not listed in Sections 2(a) or 2(b) must be submitted to the Director of Development for review and approval within a reasonable timeframe.
4. Reasonable Utility Expenses
a. City Code Section 4565.02(X) requires that the rent limit for an Affordable Housing Unit include an allowance for reasonable utility expenses. Reasonable utility expenses are determined in accordance with the methods set forth in 26 CFR 1.42-10 as amended from time to time. Utility expenses must be based on usage and not stated as a flat fee.
b. Notwithstanding the foregoing, a ratio utility billing system (commonly referred to as RUBS) is permitted.
c. Required utility expenses include, but may not be limited to:
i. Electric;
ii. Gas;
iii. Sewage;
iv. Trash removal;
v. Water;
d. Expenses that are not required include:
i. Internet service;
ii. Phone service
iii. Cable service
5. Number of Affordable Housing Units
a. Six months after the issuance of the Final Certificate of Occupancy (or equivalent), at least a proportional number of the required percentage of Affordable Housing Units as compared to the total number of occupied units in the Development Project must be occupied, and calculated as follows:
Number of units in the Development Project multiplied by the overall percentage of occupied units multiplied by the required percentage of Affordable Housing Units.
For example: a Development Project has 100 total units and is required to provide 10 Affordable Housing Units for tenants at or below 60% AMI and 10 Affordable Housing Units for tenants at or below 80% AMI. Six months after issuance of the Final Certificate of Occupancy (or equivalent), the Development Project is 50% occupied. The number of Affordable Housing Units required to be occupied six (6) months after issuance of the Final Certificate of Occupancy (or equivalent) is five (5) Affordable Housing Units to tenants with annual household incomes at or below 60% AMI and five (5) Affordable Housing Units for tenants at or below 80% of AMI.
A Development Project will be deemed non-compliant if during a lease-up, the overall number of Affordable Housing Units required to be occupied has been satisfied, but the proportional requirements of each AMI category have not both been satisfied. In the foregoing example, if six (6) months after the issuance of the Final Certificate of Occupancy (or equivalent), six (6) Affordable Housing Units are occupied by tenants at or below 80% AMI and only four (4) Affordable Housing Units are occupied by tenants at or below 60% AMI, the Development Project will be considered non-compliant.
b. All calculations ending in a decimal number must be rounded up to the next whole number. If doing so results in an odd number, the odd numbered unit must be assigned to the lower AMI category. As an example, a Development Project contains a total of 11 housing units and the Project Sponsor selects the option of providing 10% of units at or below 60% AMI and an additional 10% of units at or below 80% of AMI. 11 x 20% = 2.2, which is rounded up to three (3) Affordable Housing Units. Given that this is an odd number, two (2) Affordable Housing Units must be assigned to the 60% or lower AMI category and one (1) Affordable Housing Unit must be assigned to the 80% or lower AMI category.
i. Special consideration will be given to Development Projects whose total unit count is four (4) or five (5). In both cases, only one (1) unit is required at the 60% or lower AMI level as opposed to one (1) unit at each the 60% or lower AMI level and the 80% or lower AMI level.
c. Pursuing a blend of Affordable Housing Units and fee-in-lieu (or other eligible credit options) is permissible; however, such a blend must be proportional to both AMI and to unit type. As an example, a Development Project contains 40 total units. Pursuing the option of 10% of units at or below 60% AMI and 10% of units at or below 80% AMI implies four (4)Affordable Housing Units at or below 60% AMI and four (4)Affordable Housing Units at or below 80% AMI. Assume too that this full Development Project contains 20 one-bedroom units and 20 two-bedroom units. Assume the blend of Affordable Housing Units and fee-in-lieu units is a 50/50 split amongst AMIs and unit types. This means providing four (4) units as fee-in-lieu and four (4) units as Affordable Housing Units described below:
i. Unit 1: 60% AMI, one-bedroom
ii. Unit 2: 60% AMI, two-bedroom
iii. Unit 3: 80% AMI, one-bedroom
iv. Unit 4: 80% AMI, two-bedroom
The Department of Development - Division of Housing reserves the right to perform its own calculation of appropriate apportionment in line with these guidelines.
6. Default
a. Before revoking, terminating, or modifying the CRA Agreement or the tax abatement as a result of the Project Sponsor’s default or breach, the City shall provide the Project Sponsor with written notice and a reasonable opportunity to cure any such default, except the City shall not be required to provide written notice of the Project Sponsor’s default or breach and a reasonable opportunity to cure:
(i) more than two times during any twenty-four (24) month period;
(ii) in connection with the Project Sponsor’s breach of its notification obligations described in Section 6 of these rules below; or
(iii) if the Project Sponsor has provided a fraudulent certification to the Director.
b. If the Project Sponsor fails to notify the Director of the shortfall of Affordable Housing Units within the time period pursuant to Chapter 4565 of City Code or the CRA Agreement, the City, as its sole remedy for such default, and without first being required to provide notice to Project Sponsor, may impose a penalty as provided in Chapter 4565. The penalty shall be paid to the City of Columbus.
c. The sole monetary damages payable by the Project Sponsor for a breach of the CRA Agreement are those set forth in the CRA Agreement. Monetary damages do not include the impact of the loss of the abatement.
7. Appeals
a. The Project Sponsor retains its right of appeal under Section 3735.70 of the Ohio Revised Code, with respect to determinations made by the Housing Officer pursuant to Section 3735.67 of the Ohio Revised Code for issues related to the annual inspection of the project as provided for in Section 3735.70 of the Ohio Revised Code, but not for any matters related to the CRA Agreement.
8. Monitoring Fees and Annual Report
The annual monitoring fee is due on or before March 1 of each year. The form of the annual report required to be submitted by the Project Sponsor will be distributed to the Project Sponsor by the City. The annual report is due on or before March 1 of each year based on the leasing activity as of December 31 of the prior year.
The rules as set forth above are incorporated by reference into the CRA Agreement and shall apply to the interpretation and operation of the CRA Agreement throughout the term of the CRA Agreement. Subsequent revisions to the rules set forth above shall not be binding on the Project Sponsor without an amended CRA Agreement signed by both the Director and the Project Sponsor. In the event that an amendment to these rules is required to comply with the provisions of the Ohio Revised Code, the Director may amend these rules as needed for the benefit of the program.
Development Projects which benefit from the Home, Home Match, or Low Income Housing Tax Credits (LIHTC) may, at the Director’s discretion, be exempt from annual reporting and from paying monitoring fees, so long as the City of Columbus receives substantially similar documentation to verify affordability compliance.
9. Deadline to File Applications
A “proper application” is defined in Columbus City Code 4565 as a Phase 2 / Final / Project Review application. This must be submitted no later than two (2) years following the issuance of a Final Certificate of Occupancy (or equivalent); or, in the case of eligible expenses that per Building and Zoning Services do not require a Final Certificate of Occupancy (or equivalent), then a Phase 2 / Final / Project Review application must be submitted no later than two (2) years following the closing of said permits. This shall not apply to applications which submitted a Phase 1 / Initial / Program Qualification application within two (2) years of completion of the project The Division of Housing reserves the right to review permit applications that remain open and may reasonably determine that a project has been completed despite the permit not being closed.
At the discretion of the Housing Officer, this two-year deadline may be waived due to demonstrated financial or organizational hardship in filing the Phase 2 / Final / Project Review application within the prescribed timelines.
10. Transition from 2018 to 2022 policy
The transition language for Ordinance 1843-2022 and incorporated into each CRA reads as follows:
“Obtains all necessary building permits on or before August 31, 2023; or has closed on all project construction financing and obtained at least 50% of the project’s building permits by August 31, 2023.”
To document closing of all project financing, the Project Sponsor must supply the following:
- If the project is being financed, both of the below are required:
o Proforma describing full scope of financing, with a notarized attestation by the Project Sponsor for accuracy.
o Closing statement by each lender, with a notarized attestation that the financing closed. If there is one closing entity, that one entity may provide this attestation.
- If the project is being self-funded, a notarized statement from the Project Sponsor’s banking institution stating sufficient funds are/were available for the project is required.
The percentage of necessary building permits obtained is defined as the minimum required permits issued per parcel or the minimum required permits issued per Development Project as described in Chapter 4565 of the Columbus City Codes. Said permit(s) may be transferable for purposes of the transition language to new parcels in the event of a parcel split or parcel combination. If said permit(s) expire or are revoked by the Department of Building and Zoning Services, said permit(s) will no longer be valid for purposes of the transition language.
The below are defined as minimum permits required, and more permits may be considered at the discretion of the Housing Officer and the Director of Development:
New Construction: MBLD, NEWC, NEWM, or NEWR
Renovation or Gut-to-Stud: ALTC, ALTM, ALTR, CBLD, MBLD, or RBLD. In some cases minor projects may not require the aforementioned permits. If this is the case, then permits including but not limited to ADDM, ADDR, EMEPR, PMEPR, PMEPM, and RSWDR, and RSWDM can satisfy the transitional percentage requirements as referenced at the beginning of this section, per the Department of Development - Division of Housing’s discretion.
|
ALTC |
Commercial : Structural : Alteration |
|
ALTM |
Multi Family : Structural : Alteration |
|
ALTR |
1,2,3 Family : Structural : Alteration |
|
CBLD |
Building/Commercial/New Construction/Addition |
|
MBLD |
Building/Multi Family/Major Alteration/Renovation |
|
RBLD |
Residential : New Construction : Structure |
|
ADDM |
Multi Family : Structural : Addition |
|
ADDR |
1,2,3 Family : Structural : Addition |
|
EMEPR |
Electrical Permit | 1,2,3 Family |
|
PMEPR |
Plumbing Permit | 1,2,3 Family |
|
PMEPM |
Multi Family : MEP : Plumbing |
|
RSWDR |
Roof, Siding, Windows, Doors | 1, 2, 3 Family |
|
RSWDM |
Multi Family : Structural : Roof, Siding, Windows, Doors |
A CRA Agreement shall not be executed prior to a project being fully analyzed for its transitional timeline.
11. Fee-in-Lieu Inflation Calculation
Fee-in-lieu amounts are calculated every August 1 beginning on August 1, 2023. The increase is based on Consumer Price Index (CPI) inflation plus an additional five (5) percentage points. The determination of which inflationary period a project falls under shall be determined by the date that a project’s first minimum permit as described in Section 10 was issued.
12. Columbus Housing CRA
If a parcel is divided between two or more census tracts, the parcel shall be considered to be in the census tract that contains the majority of the geography.
Development Projects that are to be approved under a Dissolved CRA (based on the date of issuance of the Final Certificate of Occupancy or equivalent) with a higher Area Designation than that of the CHCRA census tract the Development Project is in, said Development Project shall be eligible for the lower Area Designation of the CHCRA census tract despite the Area Designation of the Dissolved CRA the Development Project is approved under. The ranking of Area Designations, from highest to lowest in terms of affordability requirements, is: Market Ready, Ready for Revitalization, then Ready for Opportunity.
13. Chapter 4565.13 Waiver Terms
Development Projects meeting the requirements under Chapter 4565.13 may apply for a waiver of the Affordable Housing Unit requirements under 4565.05(B). The Form of Waiver of Application will be provided upon request.
The Cost of Ownership requirement of housing units approved under this waiver shall be fulfilled by either of the below methods:
a. By said housing unit being issued a federally-insured loan, including but not limited to Federal Housing Administration (FHA), Veterans Affairs (VA), Government National Mortgage Association (GNMA), and United States Department of Agriculture (USDA) loans. The City deems federally-insured mortgages to satisfy the Cost of Ownership requirement due to their serving first-time homeowners and borrowers otherwise disadvantaged in the conventional mortgage lending market.
b. By the terms described in Section 2(f) above.
14. Affordable Height Bonus
An Affordable Housing Height Bonus Applicant must indicate Height Bonus on a form approved by the Director. Applicant must submit a preliminary site compliance plan along with the Application. The plan shall include a data table showing the proposed total number of units, proposed number of affordable units with bedroom counts, and proposed number of bonus stories.
The Department of Development will issue a letter of eligibility advising an Applicant of the Area Designation in which the proposed Development Project parcels are located and what the Affordable Housing Unit Requirements will be for the project.