New Subsidy Layering Review Notice Published

In mid-March, HUD published a new notice titled “Administrative Guidelines: Subsidy Layering Review for Project-Based Vouchers” in the Federal Register. The new notice provides background information about what subsidy layering reviews (SLRs) are; it provides information about when SLRs are needed and applicable safe harbor standards; it discusses the potential role of Housing Credit Agencies; and provides other miscellaneous information, including an appendix with the required elements of an SLR application, which may also serve as a checklist.

HUD mandates that SLRs are performed when project-based vouchers (PBVs) are used in conjunction with other subsidies to ensure that projects are not overly subsidized. This mandate is not applicable to existing housing.

When a PHA begins a new construction or rehabilitation that requires PBVs, it is required to request that an SLR be completed in certain instances. The PHA is responsible for collecting the appropriate documentation.

There are certain safe harbor requirements in SLRs. When a project falls within the scope of these safe harbors, and HUD is conducting the SLR, the project may move forward without additional justification. If the project falls outside the safe harbors, then additional documentation and justifications are required. If a housing credit agency (i.e., a state housing finance agency; HCA) is performing the SLR, the safe harbor requirements may only be exceeded if costs outside the safe harbor still fall within the HCA’s published qualified allocation plan.

A PHA may not execute an Agreement to Enter Into a Housing Assistance Payments Contract (AHAP) until the SLR has been completed and approved by either HUD or the HCA, depending on the circumstance. The chart below reviews project scenarios and potential entities, if any, that may perform the SLR.

ScenarioSLR ReviewerNo additional government funding certification required?
New construction or rehabilitation with PBV funding and 2 or more forms of government assistance.HCA or HUD.*If by HCA, no certification required. If by HUD, then HUD certifies.
New construction or rehabilitation with PBV and Low-Income Housing Tax Credit (LIHTC) funding.HCA or HUD.If by HCA, no certification required. If by HUD, then HUD certifies.
PBV existing housing.No SLR required.No.
New construction or rehabilitation with only PBV assistance.No SLR required.No.
Mixed-finance projects, with or without LIHTC, with or without PBV assistance, with other forms of government assistance.HUDYes.
*PHAs may request that HUD perform the SLR if the project does not use LIHTCs.

The full notice can be found here.

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