Site control and due diligence — South Carolina

Site control: five allowed instruments, and a rule that kills competitive-credit scattered sites outright

Threshold Section IV.B requires an application to include one of five site-control instruments, each executed by a Principal: a recorded deed; a purchase option with date-certain performance (options on other options do not qualify); a purchase contract with date-certain performance; a ground lease or option on a ground lease with a term of at least fifty years; or a legally valid assignment of any of the above. The Authority may separately require a quiet title action before placed-in-service. Related-party ground leases are barred without prior Authority approval, except for a local government or public housing authority lessor, and any acquisition cost under a ground lease is excluded from development and operating costs. Developments intended to convert to homeownership after fifteen years may not use land leases at all.

The rule most likely to trip up an out-of-state developer sits at the very end of that section: "Developments comprised of buildings located on noncontiguous parcels (scattered site) are ineligible for 9% LIHTCs." That is an absolute disqualification for the competitive federal credit, not a scoring penalty. The tax-exempt bond program runs the opposite policy: Appendix C2's own Scattered Site provision allows noncontiguous parcels for a 4% bond deal, provided all buildings sit under one ownership entity, one management entity, and one plan of financing; the whole development is appraised as a single proposed development; every noncontiguous parcel sits in the same county; and each parcel contains at least four units. A scattered-site strategy that looks feasible on the bond side of the program is a nonstarter on the 9% side -- the two credit types are not interchangeable on this point.

Zoning, wetlands, and the Phase I: what has to be true by full application

Threshold Section IV.C requires "proof of proper zoning being in place at the time of application submission, including approval of all necessary special/conditional uses," typically evidenced by a letter from the City/County official confirming the site currently meets local zoning or land-use restrictions. Because the QAP's own introduction defines "application" to mean the full application unless otherwise specified, this threshold's real deadline is the full application date, not the preliminary application date -- a distinction covered further under Entitlement Pathway Election, since there is no cure period or "steps to achieve zoning" alternative built into the threshold.

Section IV.D requires two categories of environmental due diligence with the full application: a wetlands determination map covering both jurisdictional and non-jurisdictional wetlands (Exhibit W, completed by a qualified professional), and a Phase I Environmental Site Assessment dated no more than six months before the full application deadline. The Phase I must be prepared under ASTM Practice E-1527-13 (or its successor) by a third-party environmental professional meeting the federal All Appropriate Inquiries definition at 40 CFR Section 312.10(b), who cannot be a member or affiliate of the Development Team, and must identify Historical, Controlled, and Recognized Environmental Conditions (HRECs, CRECs, and RECs). Pre-1978 buildings require lead-based-paint testing as part of the same report. If the environmental professional recommends further examination, a Phase II must be submitted with the same application, including a mitigation narrative and cost estimate -- there is no "flag it now, resolve it after award" path.

Section IV.J layers a further set of mandatory and disqualifying site characteristics on top of the environmental report, covered in depth under Site Sourcing and Screening: minimum surrounding-use and utility-access requirements, an outright bar on subdividing an existing development or filing more than one new-construction phase of the same project in a cycle, a slope/terrain cost test, and the National Priorities List / cleanup-agreement disqualification that still names the now-defunct DHEC. A separate list of distance-based disqualifiers -- railroads, airports, agricultural and waste facilities, junkyards, bulk fuel storage, adult-entertainment venues, and listed heavy-industrial uses -- can be waived with well-documented extenuating circumstances filed at least 30 days before the preliminary application, which puts the waiver clock ahead of the screening-to-diligence handoff, not after it.

The market study: capture rate, absorption, and a two-cycle exclusion zone

Every application must include a third-party market study from an SC Housing-approved market analyst, prepared under the Authority's Market Study Guideline Procedures (Appendix A). Three numeric thresholds have to clear regardless of what the study otherwise concludes: a capture rate at or below 30 percent, an absorption/lease-up period of 12 months or less, and compliance with a same-market-area restriction. That last rule bars a new-construction application from targeting the same tenant population within a half-mile radius or the same census-tract-defined market area as an existing Authority-funded development awarded in the previous two tax-credit or tax-exempt-bond cycles, if that existing development is running vacancy above 10 percent in the second and fourth quarters of the prior year's operations, or is an awarded-but-not-yet-placed-in-service development -- unless the Authority determines the underlying reason is not a market issue. The market analyst must reach an explicit conclusion on whether the proposed development would cause a lease-up or occupancy problem for any existing or awarded LIHTC project in the same primary market area, not just report the numbers.

Appraisals: South Carolina's own licensing and valuation rules

Threshold Section IV.I requires a commercial real estate appraisal naming the Authority as an authorized user. The appraiser must hold a State Certified General Real Estate Appraiser license from the South Carolina Real Estate Appraisers Board -- a temporary practice permit does not qualify, and an appraiser licensed elsewhere must obtain a reciprocal South Carolina license -- and must appear on SC Housing's own Approved Appraisers list. The appraisal must conform to USPAP, and its comparables must come from the site's sub-market, or from the site's county or an adjacent county if no sub-market comparables exist, excluding comparables drawn exclusively from prior LIHTC developments.

If the acquisition price exceeds the appraised value, the Authority writes the purchase price down to the appraised value; it may also hire a second appraiser at the applicant's expense. New-construction land must be valued by acreage without regard to contemplated improvements or restrictions, using comparable land sales or the land-only component of improved sales with common zoning. Acquisition/rehabilitation deals require both an "as-is" fee-simple value assuming market rents (ignoring below-market financing, subsidies, and LIHTCs) and a second value based on current restricted rents that does account for those same factors. RD-funded deals add the interest-credit subsidy value to the as-is restricted-rent value to reach the appraised figure. Every appraisal must separately disclose and quantify any valuation loss attributable to a detrimental characteristic near the site -- the same adjacency issues Section IV.J screens for structurally now have to be priced.

Rehabilitation-specific due diligence: PNA, age floor, and displacement limits

Rehabilitation applications carry their own due-diligence stack. An "as-is," pre-rehabilitation Physical Needs Assessment, certified by a third-party independent licensed engineer or architect and dated no more than 12 months before the application, is required under Section IV.A.4 and Appendix B -- a post-rehab PNA or a generic property condition report does not qualify (RD projects may substitute the USDA/RD rehabilitation assessment). The PNA has to support a minimum of $50,000 per unit in hard construction costs (excluding major systems replaced within the past seven years), with at least $25,000 per unit attributable to unit interiors. Buildings must be at least fifteen years old and not so deteriorated as to require demolition, and no more than 10 percent of existing tenants may be permanently displaced without the Authority's advance approval. A current, property-manager-certified rent roll (Section IV.A.5) and a detailed relocation plan and cost estimate for any displaced households (Section IV.A.7, using Form 3 for rehab projects) round out the rehabilitation-specific file.

As a condition of any rehabilitation award, the Authority schedules an onsite inspection with the Applicant and the third-party engineer or architect to discuss the proposed scope of work directly -- a step worth budgeting time for separately from the paper PNA itself.

Utility allowances and the notification duty the Authority carries out itself

A distinctive procedural feature sits in Threshold Section IV.K: every application, regardless of credit type, must include signed notification letters addressed to the site's highest local official (mayor or county administrator), the State Representative and State Senator for the district, and every City/County Council member, disclosing the proposed owner, the project type, unit count, acreage, target population, site address, and the fact that the project is applying for both federal LIHTCs and the state STC. The applicant drafts and signs these letters using SC Housing's own form -- but the QAP states plainly that "the Authority will deliver the letters," not the applicant. That is a due-diligence documentation requirement, not a public-hearing requirement in itself; it is a distinct notice mechanism from both the local zoning process and the state credit's own statutory public hearing, both covered under Entitlement Pathway Election.

Financial underwriting closes out the due-diligence phase rather than opening it, but its caps shape what a site-control negotiation can actually support: developer fees are capped at the lesser of 15 percent of Total Development Costs (net of land, consultant fees, developer fees/overhead, other developer costs, and reserves) or a tiered per-unit schedule -- $30,000 per unit for the first 50 units, $25,000 for units 51 through 100, and $20,000 for any unit beyond 100. Combined contractor profit, overhead, and general requirements are capped at 14 percent of hard construction costs (6 percent profit, 2 percent overhead, 6 percent general requirements), and replacement reserves must be funded at $300 per unit annually (up to $450 if a lender or syndicator requires it in writing). A site whose acquisition price or entitlement costs eat too far into these caps will surface as infeasible in underwriting long before it reaches the board -- worth modeling during due diligence, not after.