Subsidy – Rental and Cooperative Developments

Policy Statement
DND will provide loans to developers of affordable rental projects to assist with costs that are in excess of construction, permanent, and/or other subsidy financing and equity resources.  The amount of funds invested in a rental or cooperative housing project will always reflect the minimum amount of public subsidy necessary to achieve the maximum public benefit. 

The amount of each request should be limited to the least amount of public funds necessary to make the project feasible, should be restricted to eligible costs directly related to the housing development project, and must comply with cost and underwriting standards currently accepted as industry standards by all other lenders involved in the project. 

Amount: The amount of funding will be limited to the gap between the amount of debt supportable by the anticipated net operating income from the operations of the project plus any other anticipated capital or equity contributions and the approved total development cost of the project.  Generally, per unit commitments will not exceed $50,000 per unit.

Term:  The term of the assistance will be for a minimum period of thirty (30) years. 

Interest Rate:  The interest rate charged will depend upon the needs of the project given the terms of the other funding sources and the ability of the project to support DND debt.

Repayment Terms:  The conditions for payment will always be based on the needs of the particular funding request. 

• Payments of principal and/or interest during the construction and rent-up period will be deferred to minimize development costs. 
• DND will require one of the three following payment options during the operational phase of the project: 

1. fixed monthly payments;
2. cash flow payments, with a minimum payment of 50% of all cash flow payable to public subordinate debt, such as DND and DHCD, after deducting normal and customary operating expenses and senior debt service payments¹; or
3. fully deferred payment of principal and interest until loan maturity. In all cases, all outstanding principal and interest will be due and payable at loan maturity.