Specialized Housing Solutions

Year 15 LIHTC Transitions

Year 15 LIHTC Transitions: Your Exit Strategy Experts

The end of the 15-Year Compliance Period is the most critical milestone in the life of an affordable housing asset. It is the moment of maximum opportunity—and maximum risk.

Owners face a complex crossroads: Do you sell? Do you renovate and “resyndicate” for new credits? Or do you pursue a Qualified Contract (QC) to de-regulate the property?

At Hawaii Affordable Properties, Inc. (HAPI), we are the local experts in Year 15 Dispositions. We guide General Partners (GPs) and Non-Profit Boards through the regulatory maze to unlock the value trapped in their aging assets while protecting their reputation.

The “Year 15” Crossroads

We help you choose the right path for your asset.

The Strategy Who It Is For How HAPI Helps
Resyndication Owners who want to hold the asset and fund major renovations. Pre-Audit Sweep: We clean up files to ensure the property qualifies for a new allocation of 4% or 9% credits.
Qualified Contract (QC) Owners looking to sell or convert to market rate. QC Request Package: We calculate the statutory “QC Price” and manage the 1-year marketing period required by HHFDC.
Investor Exit GPs buying out the Limited Partner (LP). Physical Needs Analysis: We assess the true capital cost of the building to help you negotiate a fair buyout price.

Core Transition Services

1. Resyndication Support (Acquisition/Rehab)

If you plan to apply for new tax credits to renovate the property, your compliance history will be scrutinized.

  • The “Clean Slate” Audit: We audit 100% of existing tenant files to identify any “Non-Qualified” households that could jeopardize your new credit basis.
  • Tenant Relocation (URA): Renovating an occupied building is a logistical nightmare. We draft the URA-Compliant Relocation Plan, managing temporary tenant moves (hotel or swing units) so construction can proceed without lawsuits.

2. Qualified Contract (QC) Management

For owners seeking to exit the affordable program (if eligible).

  • The “De-Control” Process: We manage the formal request to HHFDC to find a buyer. If no buyer is found within 1 year, we guide you through the 3-year “De-Control Period,” transitioning rents to market rate while protecting existing tenants as required by law.
  • Rent Optimization: We analyze the market to determine the true potential revenue of the asset post-restriction.

3. Extended Use Period Monitoring

Even after Year 15, most properties have an “Extended Use Period” (often 30 to 61 years total) governed by the LURA (Land Use Restriction Agreement).

  • LURA Analysis: We review your specific deed restrictions to determine which rules burn off and which remain in perpetuity. (Hint: Hawaii’s rules are often stricter than the IRS).

The Transition Timeline: When to Act

Don’t wait until Year 14 to plan. The IRS requires early action.

  • Year 13 — Capital Needs Assessment (CNA): We order an updated CNA to see if the building needs a major rehab (Resyndication) or is stable enough to sell.
  • Year 14 — File Audit: HAPI conducts a 100% file review. If we find non-compliant files, we cure them before the investor sends their final exit team.
  • Year 15 (Month 1) — Notices: We issue required notices to tenants regarding the future of the building (Preservation vs. Opt-Out).
  • Year 15 (Month 6) — The Exit: The Limited Partner exits, and the GP takes full control.
West Loch Elderly Village

Proven Success: The “Forever” Asset

Most management companies only care about the first 15 years. We stay for the long haul.

Project: Kekuilani Courts (Kapolei) The Story: Completed in the mid-90s, this 80-unit family workforce housing property faced the critical “Year 15” cliff where many owners sell or let quality slide.

The HAPI Difference: HAPI successfully guided the property through its Preservation & Acquisition phase. We managed the complex “In-Place Rehabilitation,” ensuring residents remained safely housed during major renovations. Today, Kekuilani Courts remains a model of stability, providing affordable housing to Kapolei families long after other properties have converted to market rate.

Frequently Asked Questions

Can we increase rents after Year 15?

It depends entirely on your LURA (Land Use Restriction Agreement). While the IRS 15-year period may end, HHFDC often imposes an “Extended Use Period” (totaling 30-61 years) that keeps rent caps in place. We analyze your deed to give you a definitive answer.

What is a "Qualified Contract" (QC)?

It is a request to the state (HHFDC) to find a buyer who will maintain the affordability. If HHFDC cannot find a buyer at the calculated “QC Price” within 1 year, you may be allowed to phase out restrictions. HAPI manages this complex calculation and submission process.

What happens to existing tenants if we convert to market rate?

Under the “De-Control” period (Section 42(h)(6)(E)(ii)), you generally cannot evict existing low-income tenants without “Good Cause,” and you cannot raise their rent for 3 years following the opt-out. We help you manage this sensitive transition to avoid PR nightmares.

How does "Resyndication" work?

 Resyndication involves the current owner “selling” the building to a new partnership (which they also control) to trigger a new set of Acquisition Rehab Credits (4% LIHTC). This generates millions in equity to pay for new roofs, windows, and kitchens.

Do you handle the "Right of First Refusal" (ROFR)?

Yes. Many non-profit partners have a ROFR to buy the property at a discount at Year 15. We assist non-profit boards in analyzing whether exercising this right is financially viable based on the building’s capital needs.

Maximize Your Asset’s Value

Don’t guess about your Year 15 options.
Get a strategic analysis.

Contact Our Consulting Team