The Annual Percentage Rate is a measure of the cost of credit, expressed as a yearly rate. The APR is determined using a formula prescribed by the Truth in Lending Act of 1968.
Area Median Income (AMI) is the midpoint household gross income of a metropolitan area, as defined by the U.S. Department of Housing and Urban Development (HUD). Many affordable housing programs target occupants within a certain income range that is calculated with a formula that adjusts for household size and the nature of the program in relationship to the AMI.
An as-of-right program benefit is available automatically to an owner or developer meeting some agreed-upon criteria or performing a specific activity.
A mortgage with a final payment greater than preceding payments, and which pays the loan in full, is a balloon mortgage.
Below Market Interest Rate (BMIR) loans carry interest rates lower than the rates offered by private lenders. BMIR loans reduce the ongoing cost of borrowing.
Certain programs are financed with tax-exempt or taxable state or local bonds. Bonds used to finance affordable housing are issued by New York State Homes & Community Renewal (HCR) and by the New York City Housing Development Corporation (HDC).
Bridge financing is short-term financing made between an acquisition loan and a construction loan closing.
A Buy-Sell agreement exists between a construction lender and a permanent lender. It spells out the terms for the construction lender’s sale and assignment of the mortgage to the permanent lender upon the completion of a building.
City capital funds are appropriated from New York City’s capital budget, which is financed by general obligation or revenue bonds. City capital funds may pay for land acquisition, construction, or redevelopment of physical infrastructure used for government operations or for public use. These contrast to funds from the city’s general operating budget, which is financed by property taxes and other tax levies and pays for ongoing city government services and maintenance of capital projects. Debt service on the bonds is paid directly from the city’s general operating budget and indirectly from the revenues earned at the project from rents and other forms of income.
Vacant or occupied properties owned by New York City through tax foreclosure (also known as “in-rem” properties), eminent domain, urban renewal, purchase, or as a gift are referred to as “City-owned.”
A Community Development Corporation (CDC) is a type of non-profit entity that primarily focuses on housing production, economic development, job creation, and/or community development. CDCs are not eligible to receive a priority on the allocation of federal HOME funds, unless they are approved to be a Community Housing Development Organization (CHDO) as well. CDC board or staff leadership usually includes stakeholders in the community.
A Community Housing Development Organization (CHDO) is a private, 501(c)(3) eligible, community-based service organization that aims to provide affordable housing for the community it serves. Designated by the U.S. Department of Housing and Urban Development (HUD), CHDOs are eligible to receive Federal HOME funds and may receive priority over non-CHDOs in other federal funding decisions.
The Davis-Bacon Act is a federal law requiring that public works contracts to which the federal government is a party must comply with prevailing wage laws. Prevailing wages are based on the Secretary of Labor’s determination of payments to corresponding classes of laborers employed on similar projects.
New York State Division of Housing and Community Renewal (now known as HCR)
The New York City Department of Housing Preservation and Development (HPD) developed disposition programs in the 1980s in order to dispossess the city of properties it owned and managed. Some of these include the Vacant Building Program, Neighborhood Entrepreneurs Program, Neighborhood Redevelopment Program, Tenant Interim Lease Program, Tenant Ownership Program, and Neighborhood Homes Program.
New York City Department of Finance
New York City Economic Development Corporation
Fee simple ownership represents absolute ownership of real property but it is limited by basic government powers such as taxation, eminent domain, and police power and could also be limited by certain encumbrances or conditions in the deed.
The mortgage on a property with the highest priority in public records is called a first position mortgage. The first position mortgage usually carries lower risk for lenders than other mortgages and is usually superior to a second (also known as junior or subordinate) mortgages typically taken by government agencies to secure subsidies to a project. In New York State, the holder of the first position mortgage is also the first to be paid if the property is sold at foreclosure.
For-profit developers are private firms or individuals that hope to make a profit to distribute to shareholders after completing a project.
A loan that relieves the borrower from the obligation of loan repayment if certain requirements are met is known as a forgivable (or evaporating) loan. Some housing subsidies are structured as evaporating loans in order to comply with a New York State prohibition against the ban on gifts of state money to private entities found in Article VII, Section 8, of the State Constitution.
A municipal bond backed by the credit and taxing power of the issuing jurisdiction, rather than the revenue from a particular project, is referred to as a general obligation bond.
A grant is a gift of funds that does not have to be repaid. Depending on the program and the recipient, the grant may or may not be taxable to the recipient.
Also known as “Gut Rehab,” gut rehabilitation entails the major restoration of a building, including taking walls back to the studs and beams and replacing them, along with some or all of the trim, windows and doors, plumbing and electrical systems, exterior siding, roof, etc. Gut Rehab projects involve interior structural modifications and sometimes involve exterior structural modifications.
Expenses incurred directly in the construction, renovation, or alteration of a building are hard costs, otherwise known as “brick and mortar” costs. This includes purchase of construction materials and the cost of labor. Hard costs do not include indirect expenses or “soft costs,” such as the cost of acquiring the land or building, or professional fees such as architectural, engineering, or legal services.
New York State Department of Homes and Community Renewal
New York City Housing Development Administration (now known as HPD)
New York City Housing Development Corporation
New York State Housing Finance Agency (now part of HCR)
A Housing Development Fund Corporation (HDFC) is a corporation organized under New York State’s Private Housing Finance Law for the exclusive purpose of developing housing projects for persons of low-income. An HDFC project may be a cooperative apartment building, or it may be a non-profit rental housing project.
Housing revenue bonds are issued by state and local governments to specific projects and investors are repaid from mortgage loan payments. The bonds may be taxable or exempt from income taxes. They may have additional security, such as various types of public or private insurance or other form of credit enhancement.
New York City Department of Housing Preservation and Development
New York State Housing Trust Fund Corporation (now part of HCR)
U.S. Department of Housing and Urban Development
In rem is a technical term meaning “against a thing or property.” Any lawsuit or judgment made against the property, such as a foreclosure action for nonpayment of property, water, or sewer taxes, is an action “in rem.”
Programs that no longer generate new units due to expiration or cancellation of the program, or because no funds were appropriated in the budget for the program, are inactive. An inactive program may continue to have a portfolio of properties still receiving the original benefits of the program or subject to the restrictions of the program; however, inactive programs can no longer be used to support additional units.
Infill sites are vacant or underutilized sites that are challenging to build due to irregular geography or difficult site conditions.
U.S. Internal Revenue Service
A loan is financing that is expected to be paid back to the original lender or to a third party. Interest may or may not be charged depending on the loan terms.
Loan refinancing involves recasting the outstanding principal of an original, usually higher-cost, loan using the proceeds from a new, lower-cost loan.
Also known as “Mod Rehab,” moderate rehabilitation upgrades a building’s conditions to decent, safe, and sanitary conditions, or repairs or replaces a major building system.
A mortgage is a written instrument that creates a lien upon real estate as security for the payment of a specified debt.
Mortgage insurance facilitates the purchase or refinancing of affordable housing by protecting lenders against losses on mortgage defaults. This reduces the cost of borrowing by either lowering the interest rate the borrower must pay on the loan principal, or by lowering the amount of equity or income required by the borrower in order to satisfy the lender’s underwriting. Government agencies that supply mortgage insurance in New York include State of New York Mortgage Agency (SONYMA), New York City Residential Mortgage Insurance Company (REMIC), and the U.S. Federal Housing Authority (FHA).
New construction is the construction of a building on a previously vacant lot, as distinguished from gut or moderate rehabilitation of an existing building.
Non-profit developer usually refers to an organization exempt from federal taxes under Section 501(c)(3) of the Internal Revenue Code that has a mission related to providing affordable housing. Some Housing Development Fund Corporations (HDFCs) are non-profit developers, but may not have status as 501(c)(3) tax-exempt organizations.
New York City
New York City Housing Authority
New York State
A housing unit that has owners or renters living in it before new construction or rehabilitation takes place. Depending on the program, renters or homeowners of occupied units may be displaced during construction or may continue to occupy the dwelling unit. Occupants can be authorized by deed, license, or lease. Unauthorized occupants may be known as squatters or trespassers.
New York State Office of Temporary and Disability Assistance
Payment in Lieu of Taxes (PILOT) is an arrangement that exempts property owners from paying real estate taxes; instead, owners pay an amount described in an agreement with the taxing entity. Funds paid through a PILOT may be directed by legislation or agreement toward a specific government project or program.
The prevailing wage is a minimum rate of pay set by the United States Department of Labor in a specific geographic area for a given class of labor and type of project. The Davis-Bacon Act defines the type of projects that require prevailing wage requirements. The New York City Comptroller enforces the prevailing wage requirements on all public works projects in New York City.
Private activity bonds are bonds issued by state or local governments to fund private activities that have a public benefit. The federal government allows each state to issue a specified amount of private activity bonds – known as “volume cap” – that will be exempt from federal and state taxes. After the federal allocation, states decide how much of their bond cap to assign to each qualifying use, which may include homeownership and rental housing. When private activity bonds are used to finance homeownership, they are known as mortgage revenue bonds. When used to finance qualifying rental projects for eligible families the project may also qualify “as-of-right” for the four-percent Low-Income Housing Tax Credits program.
Land or buildings owned by a non-government entity, such as a non-profit organization, for-profit entity, or individual are referred to as privately-owned properties.
Rehabilitation programs restore existing buildings to a more useful state. Rehabilitation projects do not demolish more than 50 percent (the total demolition allowed for “gut” rehabilitation) of the building. Government agencies may classify programs by the terms “moderate,” “substantial,” or “gut” rehabilitation, which imply a progressively greater amount of interior and exterior structural modification of the building.
New York City Residential Mortgage Insurance Corporation (part of HDC)
The term “rent regulated” can mean any program that regulates the amount of rent the landlord may charge for the apartment. In New York City, however, the term is generally used to refer to a legislative system of regulation of private apartments under two programs, rent control and rent stabilization. The rent control program generally applies to residential buildings constructed before February 1947 in municipalities that have not declared an end to the postwar rental housing emergency that emerged after World War II.
In NYC, rent stabilized apartments are those apartments in buildings containing six or more units built between February 1, 1947 and January 1, 1974. Tenants in buildings of six or more units built before February 1, 1947, who moved in after June 30, 1971, are also covered by rent stabilization. A third category of rent stabilized apartments covers buildings with three or more apartments constructed or extensively renovated since 1974 with special tax benefits.
Rental housing involves a payment for use and occupancy of a housing unit by the resident to the owner, or landlord, of the property for a period of time, based on the terms of the lease.
A Request for Proposals, or RFP, is a competitive process through which the owner of a site (often a public agency) sends an invitation for developers to submit a proposal to develop the site. The RFP lists the criteria for selection of the successful applicant.
A Request for Qualifications, or RFQ, is a process by which the owner of a site sends an invitation to select a qualified partner for real estate transactions. Qualified applicants are then eligible to be chosen for future participation in the transaction or program.
A revolving loan fund provides capital for lenders to makes loans for targeted purposes, such as affordable housing. The proceeds from the repayment of those loans are used to originate new loans for the same purpose.
“Shovel-ready” is a term used to describe projects or developments at the stage where the developer has secured all the necessary approvals to begin construction.
Single Room Occupancy, or SRO, housing is defined as a residential property that includes multiple, single-room dwelling units. Each unit is for occupancy by a single eligible individual. The unit need not, but may, contain food preparation or sanitary facilities, or both.
Expenses incurred in developing a project that are not directly related to construction are commonly referred to as soft costs. These costs may include the cost of land and permits, interest on construction loans, marketing expenses, insurance costs, taxes, and architectural, engineering, marketing, or legal fees.
State of New York Mortgage Agency (now part of HCR)
“Special needs” refers to housing that targets residents with special needs includes, for example, housing for the elderly, the homeless, victims of domestic violence, and people with disabilities.
If there are multiple mortgages on a property, the subordinate mortgage (or second mortgage, if there are only two) is the one having a lower priority for repayment than the others. The subordinate mortgage will be repaid in foreclosure only after satisfaction of the priority mortgage(s). In affordable housing programs, government may subordinate its mortgage interest to a private lender.
A subsidy is a government resource or multiple resources made available to a project in exchange for agreements or actions that benefit the public.
Tax incentives can be authorized at the federal, state, or municipal level and can reduce or eliminate property or income tax liability. Tax relief can take many forms, and is given in exchange for investment or actions that create a public benefit. Tax abatements reduce property taxes to the owner of a property for a designated period of time, usually to offset the cost of investment in the property. A tax credit is a dollar-for-dollar reduction against income tax payments granted by a taxing agency. A real property tax exemption typically refers to a full or partial exclusion of an increase in the assessed value of a newly constructed or rehabilitated property which results from such construction or rehabilitation.
Expert advice from an organization or individual that helps non-profit or for-profit organizations better understand and use affordable housing programs is considered a form of technical assistance.
Turnkey refers to a construction process whereby a builder temporarily owns a building during construction, and then conveys it to the final owners of the property once the construction is completed and the building is ready for immediate occupancy.
An apartment unit, a building, or land that is not being used or occupied before development takes place is considered vacant.
The Wicks Law mandate is a series of laws first enacted in 1912 that require New York State and its local governments to issue multiple construction contracts to ensure that the government retains direct control of the construction of certain types of state and local public projects.