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California Tax Credit Allocation Committee

Hybrid Project Guidance

CTCAC regulations allow for the tiebreaker advantage on hybrid new construction projects only. (Rehabilitation projects may submit two separate projects or a phased project with one phase seeking 9% credits and the other 4% credits but the 9% component will receive no tiebreaker benefit.)

  1. Hybrid projects are considered simultaneous phases with a developer fee limitation that covers both components in the aggregate. As an example of the developer fee calculation, assume 1) a 60-unit 9% new construction project with $20 million in pre-developer fee eligible basis and 112% high cost ratio); and 2) a 90-unit 4% new construction project with $30 million in non-developer fee eligible basis.

    The 9% developer fee limit applies to the 9% project (see the Developer Fee Calculator (new construction)) . Per the calculator, it is $1,936,000 in cost. The $1,400,000 limit in basis still applies.

    The 4% developer fee is 15% of the 4% project’s eligible non-developer fee basis, which is $4,500,000.

    However, the developer must defer or contribute as equity to one or more of the projects any amount of combined 4% and 9% developer fees in cost that are in excess of the 9% developer fee limit plus $10,000 per unit for each Tax Credit Unit in excess of 100. In this case, the combined unit total is 150 units and the combined developer fee in cost is $6,436,000. The combined cash-out developer fee may not exceed $2,436,000 ($1,936,000 + (50*$10,000)), and the contribution/deferral requirement is therefore $4,000,000. The deferred/contributed fee can be split across either or both 9% and 4% project components. Please note that in calculating the combined cash-out developer fee limit, CTCAC runs the combined basis through the Developer Fee Calculator before adding the $10,000 per unit in excess of 100 units, but each individual component is still limited by the normal developer fee limits. In this example, it makes no difference, but for smaller projects, using the combined basis may allow for a higher combined cash-out developer fee.

  2. In order for the 9% component to receive the tiebreaker benefits for hybrid projects, the 4% component must also score full points in these categories:  housing type, service amenities, sustainable building, and lowest income. The 9% and 4% components need not be the same housing type. Housing type will be evaluated separately for each component (9% and 4%) unless the same housing type is selected for each component. If both components are the same housing type, CTCAC will evaluate the housing type requirements in the aggregate (9% and 4% components). CTCAC will evaluate the lowest income points in the aggregate. For service amenities and sustainable building, CTCAC will evaluate each component separately.

  3. For each hybrid component individually, if the housing type is special needs and the special needs units will comprise less than 75% of the low-income units, the regulation provision below applies to that component (section 10325(g)(3)):

    In the case of a development that is less than 75% special needs the non-special needs units must meet the large family or senior housing type or consist of either (i) at least 20% one-bedroom units and at least 10% larger than one-bedroom units as a percentage of Low-Income Units or (ii) at least 90% SRO units as a percentage of Low-Income Units.

  4. If the 9% component of a hybrid project applies under the nonprofit homeless assistance set-aside apportionment with a special needs housing type, the 9% component is eligible to compete as applied when the 4% component is a non-special needs housing type (for example, a large family housing type). The 4% component need not be a special needs housing type.

  5. For purposes of the threshold basis limits, the threshold basis limit increases, and the 9% high cost test, each component is calculated independently. The 4% component will not be held to the high cost test.

  6. If there if a single financing commitment for the hybrid project as a whole, it can be apportioned between the two components. Include a narrative explanation in the financing plan (Tab 2). The CTCAC application’s financing table and sources and uses budget for each component will reflect that component’s apportionment. If the apportionment between the components is disproportionate, CTCAC advises contacting staff prior to the application deadline. If the commitment is eligible for final tiebreaker scoring, the 9% component final tiebreaker sheet of the Excel application should include the total eligible soft leveraged funding for both components consistent with CTCAC regulation section 10325(c)(9).

  7. For a hybrid project where the community room is on the 4% component, the 9% component application must address the 9% component common area requirements by providing a commitment letter to enter into a joint use agreement for use of the space in the 4% component, signed by both applicants. The size of the 4% common area should be large enough to meet CTCAC’s standard for the combined number of 4% and 9% units.

  8. Typically there will be separate applicants for each component, a partnership entity for the 9% component and a separate partnership entity for the 4% component. If the partnership are not yet formed, the applicant for both components may be the developer entity. If only one partnership has been formed (for one of the two components), do not apply with that partnership as the applicant for both components.