Preferable debt/equity financing for projects with affordable components
A local city just passed an ordinance that incentivizes developers but requires affordable housing. 

Are there debt and/or equity financing packages that provide preferable terms if a project includes an affordable components?
[{"id": "is9yi0u", "text": "Programs below that help fund affordable programs:\n\nL.I.H.T.C - Low income housing tax credits is a federal program. \n\nHOME Funds - local and county funding\n\nFHLB - Federal Home Loan Bank funds\n\nOther Local/town/county funding. \n\nP.I.L.O.T (Payment in Lieu of Tax) agreements with municipality.", "replies": [], "depth": 1}, {"id": "isa0dmq", "text": "I'm an affordable housing developer. How many units will be affordable?", "replies": [{"id": "iselyq7", "text": "It would be 15%", "replies": [], "depth": 2}], "depth": 1}, {"id": "isa9nfj", "text": "Not sure what state you're in, but one thing I've been seeing a lot more of in Texas are Public Facility Corporation (PFC) agreements. Usually it entails restricting half your units to various AMI levels... the few I've seen have been a handful at 30% AMI, a little more at 50% AMI, the remainder at 80% AMI, and then half unrestricted market rents. The land is owned by a partnership with the PFC and investor, ground-leased to the investor who owns the improvements, and the public ownership results in a tax abatement, mostly 100% tax abatement as long as units remain affordable. The program appears to be far less restrictive and cumbersome than going through traditional programs (like LIHTC), and in a state like Texas with absolutely ridiculous property taxes could result in higher net income.  \n  \nI'm sure my description probably has holes in it, but it should give you enough to research.  \n  \nHere are a couple sources:  \nhttps://law.utexas.edu/wp-content/uploads/sites/11/2020/09/2020-ECDC-PFC-Report.pdf  \nhttps://www.sacurrent.com/news/tax-breaks-for-developers-under-scrutiny-in-san-antonio-texas-capitol-25917121", "replies": [{"id": "isabnvd", "text": "This guy gets it, read everything he said.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iscs5jq", "text": "HUD offers some beneficial underwriting parameters depending on affordability which will benefit the debt sizing. Generally Fannie and Freddie do too depending on what you are trying to accomplish. In terms of equity, LIHTC is the most common to be paired with affordable projects, but you can seek out other equity that would likely be mission-based in some way. I'd say the latter is a lot less common unless the project is mostly market with a small affordable component. PM if you want to ask more specific questions.", "replies": [{"id": "iselobm", "text": "How would the LIHTC act as equity? \n\nWhen you say debt sizing, are you referring to the LTV?", "replies": [{"id": "isf2knt", "text": "It's a long explanation, but the tl;dr is LIHTCs are purchased up front by the LIHTC investor and then given to the developer/partnership during construction/rehab and shortly after construction completion which helps round out the sources &amp; uses. The LIHTC are then issued annually for 10 years (credit period) and passed through the partnership to the LIHTC investor. LIHTC investor uses the credits to offset federal taxes or sells them to a end-user who will use the credits. This is a very very basic explanation. Check out Novogradac's website for more detailed info and explanations.\n\nIn terms of the debt sizing, you are on the right track, but LIHTC permanent loans are rarely if ever LTV loans. They are almost always constrained by debt service, so the underwriting benefits are things like lower vacancy and lower DSCR parameters (compared to market rate) that help increase the debt size. HUD has a loan program for these types of projects which is a construction loan + perm in one (221d4) and then Fannie/Freddie issue forward commitments (MTEB/TEL for 4% transactions and then separate loan programs for 9% forwards) which locks your interest rate at construction loan closing, but acts like a construction loan take out as those funds aren't released until construction completion and stabilization, so you still have your LIHTC equity + construction loan during construction.\n\nEdit: I see in your comment below that the affordable portion is 15% which wouldn't meet the minimum requirements for LIHTC (20% @ 50% AMI or 40% @ 60% AMI). However, HUD's 221d4 loan program works for any new construction project (affordable or market or anything in between) and we could get creative to try to achieve some beneficial underwriting.", "replies": [{"id": "isfctwe", "text": "Great explanation. I saw the 15% reply to mine and am thinking that it would be beneficial to look at other soft subsidy sources through either the municipality or the state.\n\nFor OP: I am thinking about HOME, CDBG, transportation oriented development funds, supportive housing. Each will have separate sets of restrictions and red tape. However, these sources are typically loaned into the project at 1% or the AFR and will have some sort of mechanism to defer and accrue payments until the expiration of the compliance period. At which point, you are typically looking to refinance and perform deferred maintenance and the loans will be resubordinated. If you are achieving strong cash flow, the city will most likely want something but usually take a fairly junior position in the cap stack. The amount you can request is also typically tied to a per unit amount so it's fairly easy to determine what the \"ask\" is.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]