QCT & DDA

2021 QCTs and DDAs

The Department of Housing and Urban Development (HUD), published a notice designating 2021 QCTs and DDAs on September 24, 2020 in the Federal Register. Designations are made annually for all 50 states including the District of Columbia, Guam, Puerto Rica and the US Virgin Islands. The Qualified Census Tracts (QCTs) and Difficult Development Areas (DDAs) are qualified for 30% basis boost in LIHTC properties under Internal Revenue Code Section 42.

DDAs, defined as “areas with high land, construction and utility costs relative to the area median income and are based on Fair Market Rents, income limits, the 2010 census, and 5 year American Community Survey (ACS) data” (HUD). QCTs, are “areas where either 50 percent or more of the households have an income less than 60 percent of the AMGI for such year or have poverty rate of a least 25 percent” (HUD).

The American Community Survey (ACS) is not widely known as the census. The census collects data from every household every 10 years. However, the ACS gathers data every year from random addresses. The ACS like the census is required by law under Title 13, US Code. The ACS data focuses annually on housing, jobs, and education along with social and economic needs of communities. Struggling communities experienced another devastating blow this year, a pandemic.

Since SARS-Cov-2 has greatly devastated communities across the world, it is no surprise that communities with lower Area Median Gross Income levels and high poverty rates have been hit the hardest.

The challenges Developer’s face with Low-Income Housing Tax Credits (LIHTC) projects are certainly compounded as the SARS-Cov-2 pandemic continues to rage. The pandemic has resurfaced the disparities around housing, a basic need, suggesting that creative and new initiatives to support Affordable Housing are needed in the foreseeable future just like they have been in the past.

By: Quinn Newton

Housing Infrastructure

Housing Infrastructure Legislation

Sweeping infrastructure legislation released Monday, June 22, 2020 in the House of Representatives includes provisions to establish a permanent minimum 4 percent rate for the low-income housing tax credit (LIHTC), increase the annual LIHTC allocation amount, temporarily reduce the 50 percent test for bond-financed housing to 25 percent and permanently extend the new markets tax credit (NMTC) at $5 billion (with additional allocation in 2020 and 2021). H.R. 2, the Moving Forward Act, also would increase the historic tax credit (HTC) applicable percentage from 20 percent to 30 percent for five years and delay the phasedown of the renewable energy investment tax credit (ITC) until 2026.

Among the affordable housing provisions, the bill would increase the annual 9 percent LIHTC allocation amount from $2.81 to $4.56 per capita and boost the state private activity bond ceiling from $105 per capita to $135 per capita. Both provisions would increase the small-state minimum. The legislation would also provide a 150 percent first-year LIHTC award to address issues related to COVID-19 and provide several basis boosts for LIHTC properties, similar to proposals in the Affordable Housing Credit Improvement Act (H.R. 3077/S. 1703). It would also provide more than $100 billion in supplemental appropriations for various HUD programs, mostly notably $70 billion for the public housing capital fund.

The NMTC would be permanently extended, with an additional $500 million allocation for the 2019 round (for a total of $4 billion) and temporary increases for 2020 (for a total of $7 billion) and 2021 (a total of $6 billion) before settling at $5 billion 2022, with an annual adjustment for inflation. The bill would also allow the NMTC permanently to be taken against the alternative minimum tax, and instructs Treasury to ensure that tribal areas receive a proportional allocation, similar to existing policy for non-metro areas.

The legislation would increase the HTC from its current 20 percent to 30 percent for 2020 through 2024, before beginning a phasedown for most HTC properties back to 20 percent through 2027. The bill would also permanently increase the HTC percentage for certain small projects to 30 percent, and several other proposals from the Historic Tax Credit Growth and Opportunity Act (H.R. 2825/S. 2615).

The bill would delay the phasedown of the renewable energy ITC until 2026 and allow many uses of the production tax credit to cover facilities that begin construction by the end of 2025. A section-by-section summary of the bill is available.