The new equitable ownership requirement, implemented by HPD and introduced in November 2020, will require that an M/WBE or non-profit partner holds a minimum of 25 percent ownership stake in any affordable housing project awarded on public land. Moving forward, all Requests for Proposals (RFPs) issued by HPD to develop affordable housing will be subject to the new equitable ownership requirement.
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Would an Eligible Non-Profit or MWBE need to have an economic contribution equivalent to the managing ownership interest required under this policy?
If participating in a joint venture, an M/WBE or Eligible Non-profit is not required to make an equivalent contribution of equity, predevelopment investment or guaranty risk to fulfill the requirement that such M/WBE or Eligible Non-Profit hold a 25% managing ownership interest in a project. An Eligible Non-Profit is defined herein as a corporation formed under the New York Not-for-Profit Corporation Law that is not controlled by or under common control with one or more for-profit entities on the Development Team (or any owner, principal, employee, or affiliate of any such entity). Such arrangements regarding the M/WBE or Eligible Non-Profit shall be negotiated amongst the joint-venture partners.
Has HPD built in a profit for MWBEs or non-profits participating in applicable projects?
The M/WBE or Eligible Non-Profit must receive a commensurate interest in the totality of the economic benefits of the Project (net of LIHTC limited partner interests, if any), including, but not limited to, all available cash flows, paid and deferred developer fees, and sale and refinancing proceeds. There is no supplemental “built-in” or guaranteed profit from HPD for participating M/WBE or Eligible Non-Profits under this requirement.
Will you discuss how this impacts M/WBE's applying for the Acquisition Fund?
The requirement applies to public sites. which are typically conveyed to developers for nominal value of $1 per tax lot. Therefore, the Acquisition Fund would not be applicable to these public sites projects. For private site development, the City announced that the Acquisition Fund will solely finance projects led by a M/WBE or nonprofit developer with a minimum 51 percent ownership stake in the project.
With this new ownership requirement, will the M/WBE participation requirement for subcontracting remain in place?
The M/WBE participation requirement under the M/WBE Build-Up program will remain in place. The M/WBE Build-Up requirement is separate from this requirement.
What is the difference between legal and equitable title in regard to the policy?
The requirement applies to the beneficial ownership of the project, not to any nominee legal owner.
Will these new requirements apply to HPD RFP projects on City-owned sites that have been awarded but have not closed yet?
No. The policy will only apply to all RFP projects for the new construction of affordable housing on City-owned land to be released moving forward, starting with the Bedford-Stuyvesant Community Wealth and Wellness RFP released on November 20, 2020.
Is there a 25% goal for M/WBE participation in the project as a whole, or a 25% minimum ownership stake for an M/WBE or an Eligible Non-Profit entity in the joint venture?
There are two separate M/WBE-related requirements for RFPs on City-owned land. The first requirement is compliance with the M/WBE Build-Up program, which requires that developers/borrowers to spend at least a quarter of HPD/HDC-supported costs on certified M/WBEs over the course of design and construction for projects where HPD and/or HDC contributes two million dollars or more. The second is a new requirement for an M/WBE or Eligible Non-Profit entity to hold a minimum 25% ownership stake in the project as part of a joint venture.
Does the 25% minimum need to be held by one M/WBE or non-profit entity, or can the 25% minimum be split by more than one M/WBE or non-profit entity?
One M/WBE or Eligible Non-Profit entity must hold a minimum 25% ownership stake in the project – it cannot be split by more than one entity.
Can two Eligible Non-Profits create a newly-formed non-profit that will hold at least a 25% ownership interest, comprised of a Board of Directors drawn from the two existing not-for-profits and structured so that the two non-profits share the entirety of the economic benefits of the project accrued by the new non-profit?
An Eligible Non-Profit must have been established prior to the submission of an RFP response to satisfy the requirement. HPD may make an exception, at its discretion, for joint ventures between for-profit entities and proposed community land trusts.