Coordinating Multiple Funding Sources
The makeup of the capital stack in a rental housing project using HOME or HTF funds varies depending on the nature of the project. It is possible that there is a sole source or a limited number of sources of funds in an affordable rental housing project, though it is more likely that there may be three or more funding sources in a project located in an OZ. Those sources frequently include a first mortgage lender, a grantee providing soft debt from HOME or HTF resources, a third-party equity investor, and in many projects a general partner or developer contributing some personal equity to the project. In LIHTC transactions, a developer’s equity contribution may be evidenced by some portion of a developer fee being deferred.
Coordinating the requirements of many funding sources may present challenges. Partners will need to communicate needs, concerns, and requirements clearly. Project details will need to be negotiated carefully. These coordination issues are especially important if the entities involved are working together for the first time.