A Land Use Restrictive Agreement (LURA) is a legal document in which the property owner gives up some of their rights of the land use in exchange for the promise of future tax credits, tenant income restrictions, unit set asides to be rented to lower income tenants and other affordability restrictions. LURA documents the land use restrictions in a public record and runs with the land, which simply mean that the rights in the real estate deed remain with the land despite change in ownership.
Here is more on land use restriction agreements .
The purpose of a LURA is to provide affordable housing to low-income households by limiting the maximum rent that can be charged for a unit. The LURA documents the restrictions placed upon the property and guarantees that the project receives a specific number of low income housing tax credits over a specific time period. Low Income Housing Tax Credits, or LIHTC, are federal tax credits designed to encourage private businesses to invest in affordable housing.
Low Income Housing Tax Credits depend on a project providing 40% of the apartment units to tenants making no more than 60% of the area median income or allotting 20% of the units to tenants making no more than 50% of the area median income. Since LURA set the restrictions on a property, even if a developer sells the property which has a Land Use Restrictive Agreement in effect, it will transfer to the new buyer.
If the new buyer wants to develop a mixed-use project, the LIHTCs might be overly restrictive. However, there are ways to overcome this problem while maintaining the LIHTCs. One can create a master lease where a developer signs a lease to take over the commercial space. The developer thus becomes a tenant and pays a specific set rent under the income restriction back to the owner of the project. The developer can rent out the commercial space to businesses or individuals to make a profit.
The buyer can also break the mixed-use project into different pieces like a condominium's units–each owned by separate people. The developer is the sole owner of the commercial part of the project but it remains separate from the residential part of the project where the LIHTC applies.
You can read more on working with a property that has a land use restriction agreement in place, here .