HCCP Financial Analysis 5

Question 1

Which component is subtracted from total development cost to calculate the 'financing gap' that equity must fill?

Accepted Answer

Permanent loan proceeds plus other grants and soft debt

Answer

The financing gap equals total development cost minus available debt (permanent loan, soft loans, grants), which must be covered by tax credit equity.

Question 2

What is the primary purpose of a 15-year extended use agreement in LIHTC transactions?

Accepted Answer

To extend the affordability restrictions past the initial 15-year compliance period

Answer

The extended use agreement, typically covering an additional 15 years, keeps the property affordable for a total of 30 years beyond the placed-in-service date.

Question 3

In LIHTC development proformas, which expense category typically includes insurance, real estate taxes, and management fees?

Accepted Answer

Operating expenses

Answer

Insurance, real estate taxes, and management fees are recurring annual operating expenses reflected in the property's income and expense statement.

Question 4

A LIHTC investor's internal rate of return (IRR) analysis primarily values which stream of benefits?

Accepted Answer

Tax credits, tax losses, and residual cash flows over the holding period

Answer

Investors underwrite the after-tax IRR based on all economic benefits: federal tax credits, passive loss deductions, and projected residual proceeds.

Question 5

Which term describes the year in which a LIHTC project is first placed in service and the credit period begins?

Accepted Answer

Placed-in-service date year

Answer

The placed-in-service date marks when the building is ready for occupancy and triggers the start of the 10-year credit period.

(HCCP) Housing Credit Certified Professional Practice Test

(HCCP) Housing Credit Certified Professional Practice Test

HCCP Financial Analysis 5