LIHTC + HUD Layering: How to Coordinate Compliance, Reporting, and Draws Across Multiple Funding Sources

Affordable housing construction entails a variety of compliance and reporting challenges across multiple funding sources. Even simple-seeming draws can be challenging and delay projects. However, LIHTC HUD layering is attractive as a financing framework, and it’s important to leverage it the right way.

Establishing roles, timing, and documentation with early standards adoption is essential. Here is a look at how to coordinate, even amid change orders, without breaking compliance.

Where Layered Funding Creates Friction: Roles, Timing, and Documentation

A notable friction from LIHTC HUD layering is that LIHTC and HUD operate on different timelines involving different authorities. LIHTC brings you into contact with one or more state agencies. HUD funding tends to run through lenders. If you’re seeking multiple funding sources, documentation management becomes less of a task and more of a specific role. A person or an organization has to fill that role.

Affordable housing construction runs on milestones. HUD inspections and draws are tightly connected. LIHTC draws usually require specific milestones that often don’t align with the HUD or lender timeline. Draw coordination is critical to keep a project as frictionless as possible.

Documentation becomes important. Cost certifications, breakdowns, construction standards, and labor and payroll compliance are all issues. Without sufficient compliance reporting, the programs may hold up draw disbursement. This makes delays as much of a cash flow issue as a sequencing one.

Aligning Reporting and Draws: What to Standardize Early

The optimal fix occurs long before construction begins. A company needs a master compliance matrix to map funding sources in a way that tracks with compliance reporting. The matrix should make requirements, responsible parties, submission frequencies, and deadlines crystal clear. Also, the matrix has to be the single source of truth from the early days of any project.

You want draw coordination that moves as much of the process as possible into a single submission. One point of contact also has ownership of the package. This eliminates the risk of conflicting versions and duplicated efforts. It keeps your project from falling out of compliance or operating at cross purposes.

Inspection coordination is big whenever HUD and LIHTC are involved. Agencies and lenders often want their own construction monitor. Whenever possible, you want joint site visit coordination to keep everybody on the same page.

As much as possible, you want milestone unity. This ensures that the draw schedule has a rhythm. It also builds issues like payroll submission into the pace of the project.

A final early factor is the change log. Make sure it is highly shareable and current from the start.

Managing Change Orders and Substitutions Without Breaking Compliance

Change orders are a fact of life in any construction project. However, with multiple funding sources within LIHTC HUD layering, change orders can break compliance. Document management, whenever a change order goes out, is critical.

Bear in mind, there is typically a formal amendment process that runs through HUD and the lenders. There are usually defined thresholds that trigger reviews. Consequently, a few things in a change order can just be a field decision.

• Reasoning
• Costs
• Specification changes
• Costs

All this has to happen while keeping the eligible basis intact. Pulling this off within a framework is simpler, and building that framework early is best.

Coordinate Requirements Once, Then Run a Repeatable Process

A major advantage of developing a framework early is that you don’t have to reinvent the process. Once you have it in place, it is a scaffold for affordable housing construction projects that’s optimal for multifamily units. Even within a project, processes become repeatable and refined. Across many projects, it just becomes a way of doing business.

The master compliance matrix is highly reusable. Having a single draw package template that satisfies funders makes each new deal simpler and faster. Even challenges like dealing with the escalation path for conflicts become more efficient. You also have a closeout checklist for everything from inspections to equity releases.

Block Companies has been in business since 2005, and we put decades of experience to work for you. Our track record on projects in Texas and Louisiana is impressive. If you have questions about affordable, senior, workforce, or mixed-income housing, we have answers.

We have direct experience with hybrid structures and coordination across parties. You can trust us with your document management from beginning to end. At Block Companies, compliance is an internal function fully staffed to help you reduce friction on every project.

If you’re preparing affordable housing construction in the Southeast or Texas, contact Block Companies today.

Meet the Author

ONERYNO