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California Tax Credit Allocation Committee

Hybrid Project Guidance

CTCAC regulations allow for the tiebreaker benefit 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 2) a 90-unit 4% new construction project with $30 million in pre-developer fee eligible basis.

    The 9% developer fee limit of $2,500,000 in cost and basis applies to the 9% project (see the Developer Fee Calculator). Additionally, the 9% developer fee shall meet the requirements of Section 10327(c)(2)(D).

    The 4% developer fee limit applies to the 4% project (see the Developer Fee Calculator) which calculates to $4,500,000 in cost and basis, at least $2,000,000 of which must be deferred or contributed as equity.

    Additionally, 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 limit pursuant to Section 10327(c)(2)(A). The deferred/contributed fee can be split across either or both 9% and 4% project components, provided the requirements of Section 10327(c)(2)(D) are still met for the 9% component.

  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
      • The 9% and 4% components need not be the same housing type. Housing type will be evaluated separately for each component unless the same housing type is selected for both components. If both components are the same housing type, CTCAC will evaluate the housing type requirements in the aggregate.
      • If either of the components are Senior housing type and amenities are proposed to be shared, please include the third-party legal opinion as required by Section 10322(h)(34) in Tab 4.
    • Service Amenities
      • CTCAC will evaluate each component separately for service amenities.
    • Lowest Income
      • CTCAC will evaluate the lowest income points in the aggregate.

  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)):

    For any development with less than 75% of the Low-Income Units serving Special Needs Population(s), the non-Special Needs units shall either: (i) meet the Large Family, Senior, or SRO housing type requirements; or (ii) consist of at least 20% one-bedroom units and at least 10% larger than one-bedroom units.

  4. If the 9% component of a Hybrid project applies under the Nonprofit Set-Aside as a qualified Homeless assistance project 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).

  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 is 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 e-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 tie breaker scoring, the Tie Breaker sheet of the 9% component’s Excel application should include the total eligible soft leveraged funding for both components, consistent with 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.

    In the prior example of Hybrid project consisting of a 60-unit 9% component and a 90-unit 4% component, a shared common area must be large enough for the full 150 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 partnerships are not-yet-formed, the applicant for both components may be the developer entity. If only one partnership (of the two eventual partnerships) has been formed, do not apply with that partnership as the applicant for both components.

  9. For purposes of the Section 10327(a) requirement that initial application errors resulting in a shortage of sources up to the higher of $100,000 or 50% of the contingency line items be deemed covered by the contingency line item, only the contingency line item for the component in which an application was received (i.e. 9% component) will be considered for the calculation. In no case will the contingency line item for the other component of the Hybrid project (i.e. 4% component) be considered for this requirement.