On Thursday, August 25, the Texas Department of Housing and Community Affairs (TDHCA) released the 2012 real estate analysis rules for public comment. These rules encompass the department’s standards for underwriting, market analyses, appraisals, environmental site assessments, property condition assessments and replacement reserve requirements. All individuals and organizations that perform these functions for TDHCA must abide by these rules. Some changes include:
- The Underwriter should now use the Market Analyst’s conclusion of what market rent should be, if reasonably justified.
- Developments will now be characterized as infeasible if the year 1 annual total operating expense divided by the year 1 effective gross income is greater than 68% for rural developments 36 units or less and 65% for all other developments or there is a negative cash flow or a debt coverage ratio (DCR) below 1.15 any year in the first 15 years of long term pro forma.
- New property value estimate requirements for appraisals including an estimated value for existing developments with any project-based rental assistance.
Comments in advance of the September TDHCA Board Meeting about the draft 2012 Real Estate Analysis Rules may be sent to pamela.cloyde@tdhca.state.tx.us with “2012 Draft REA Comments” as the subject line. To read the draft 2012 real estate analysis rules, click here.
