760 CMR 4.15 - Transfer of Existing Public Housing Developments to Controlled Affiliates for Substantial Rehabilitation
(1) Pursuant to M.G. L.
c. 121B, ยงยง 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;
(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.
Notes
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