The Opportunity Zones Program offers a groundbreaking federal tax incentive designed to encourage development in some of the nation’s most economically distressed areas. Created as a result of the Tax Cuts and Jobs Act of 2017, the Opportunity Zones Program, or O-Zones Program, permits borrowers to defer paying their capital gains taxes until 2027, provided that they invest in an Opportunity Fund, a special financial vehicle which must invest at least 90% of its assets in a Qualified Opportunity Zone. With their long terms, high leverages, and low interest rates, HUD multifamily loans are ideal for developing multifamily properties in Opportunity Zones.
The HUD 202 program was designed to increase the supply of supportive housing for low-income elderly individuals. To do this, it provided construction, acquisition, and refinancing loans, as well as capital advances to nonprofit groups. Section 202 housing was designed to provide seniors a way to live independently, while supporting them with daily functions like cooking and cleaning. The Section 202 program is no longer offering funds to borrowers (the last funds were issued in 2012), though many Section 202-funded properties are still fully operational.
The Low-Income Housing Tax Credit (LIHTC) program is a federal government tax credit, that, since 1986, has helped facilitate the construction and rehabilitation of approximately 2.4 million affordable housing units througout the U.S. Unlike tax deductions, which create a reduction in taxable income, tax credits provide a dollar-for-dollar reduction in an investor’s tax liability, which can be an incredibly attractive proposition.
The Rental Assistance Demonstration (RAD) Program is a federal housing program administered by HUD, which was enacted in 2012 as a part of the Consolidated and Further Continuing Appropriations Act. The RAD program allows properties using HUD legacy programs to convert their properties to HUD Section 8 housing, which is much better understood, and more easily permits the use of private capital to fund rehabilitation work.
One of the most common misconceptions about HUD is that it focuses only on low-income, Section 8, and affordable housing. In reality, the HUD 223(f) program is available for all types of market-rate multifamily properties.
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements. While HUD 223(f) loans have many benefits, they are often misunderstood.
Many people aren’t aware that FHA-insured financing offers some of the industry’s longest terms. For example, the HUD 221(d)(4) program is a fixed-rate construction loan. This product is fixed for 40 years plus up to 3 years for construction (43 years total). And HUD 223(f) loans are fully amortizing for as long as 35 years (as long as the term and amortization isn’t more than 75% of the property's remaining economic life).
Although HUD (the US Department of Housing and Urban Development) and the FHA (the Federal Housing Administration) were founded separately, they share many things. For example, HUD oversees residential and multifamily insurance programs. In contrast, the FHA primarily deals with residential lending for primary residences.
MAP, or Multifamily Accelerated Processing, is a streamlined loan application processing system developed for the specific purpose of speeding up approval times for HUD/FHA multifamily loans. In general, all rules for MAP loan applications are contained in the Multifamily Accelerated Processing (MAP) Guide, which was last published on January 29, 2016.
During the HUD multifamily loan application process, borrowers will have to submit a variety of different types of documentation to HUD. One of the most important parts of this process is the submission of HUD Form 2350, which details a borrower/principal’s past participation in any HUD multifamily projects, as well as any participation involving other housing agencies.