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LIHTC Qualified Allocation Plans, Explained (A Series)

Published by Mark Shelburne on Tuesday, September 14, 2021 - 12:00AM

Mark Shelburne has revised and/or implemented 38 QAPs, in 16 states, acting in three different capacities:

  • counsel and policy coordinator for the LIHTC allocating agency in North Carolina,
  • housing development office director for the agency in Georgia, and
  • policy consultant with Novogradac.

As a result, he has a unique degree of expertise in this subject matter. See this map for more specifics on his work.

Welcome to the first in a series of 10 posts explaining qualified allocation plans (QAPs). These documents are responsible for the distribution of federal low-income housing tax credits (LIHTCs), meaning they control nearly all of the nation’s affordable rental housing production and rehabilitation. Together LIHTC developments total more than $10 billion of annual real estate activity.

Despite their immense significance, very few reports or papers describe the structure and operation of QAPs. This series addresses the gap with the following installments:

  1. Introduction (current post)
  2. Set-Asides
  3. Thresholds
  4. Selection Criteria
  5. Underwriting
  6. Creating a Competition
  7. Special Case of Cost Policies
  8. 114 Different Criteria
  9. Drafting Considerations
  10. Providing Effective Input

The subjects of posts two, three, four and five are broad categories for the organization of QAPs. The remaining posts are on particularly important aspects.

Federal Law

Internal Revenue Code (IRC) Section 42(m)(1)(B) defines three components of a QAP:

  1. includes 10 selection criteria,
  2. gives a preference to certain applications, and
  3. provides a procedure for compliance monitoring.

The first two are addressed in the fourth post of this series. Section 42(m)(1)(D) further specifies that properties claiming the 4% LIHTC associated with tax-exempt bonds also must comply with all relevant QAP requirements.

The description above is a summary, but not much of one; these provisions contain less than 300 words. Many federal statutes are broad, allowing agencies to add specificity with rules. Treasury Regulation. § 1.42-17 does cover QAPs:

“(a)(1) In general. [Reserved]”

“(a)(2) Selection criteria. [Reserved]”

Those are the actual quotes.

The only other instances of federal guidance on allocation (as opposed to compliance) in the last decade are in Notice 2016-77 and Rev. Ruling 2016-29. Both are addressed in subsequent posts.

Note a common thread within Section 42 is the LIHTC being competitively sought. Those drafting the law were correct in foreseeing demand for the resource exceeding supply.

State Administration

The limited extent of federal mandates is entirely appropriate. Congress recognized it was creating a very adaptable instrument for use in thousands of different housing markets. What is common sense for production and rehabilitation in more rural or less dense areas is not the same as in more urban, populated areas. States are far better equipped to apply the flexibility of LIHTCs in many regional conditions.

Every state has an allocating agency, as do the District of Columbia, Guam, Northern Marianas, Puerto Rico, U.S. Virgin Islands, Chicago and New York City. Several localities in Minnesota are suballocators pursuant to a state statute.

Every jurisdiction has a QAP, but it’s not always the operative, consequential document. Instead, some agencies place the relevant rules in manuals, policies, application instructions, or other files. Doing so is equally valid and can be more practical (e.g., less constrained by state administrative procedure requirements).

For the sake of simplicity, these posts will refer to agencies as being state-level entities and the relevant rules as QAPs.

NCSHA Recommended Practices

The National Council of State Housing Agencies (NCSHA) is a trade association for LIHTC allocators (and other programs). In 2017 NCSHA adopted the latest installment of its “Recommended Practices” for LIHTC administration. The first of 46 is on QAPs, and 18 others include a mention of how QAPs relate to the recommendation (2, 3, 4, 5, 8, 9, 10, 11, 12, 13, 14, 15, 22, 26, 27, 29, 38 and 42). The practices are essential reading for anyone implementing LIHTCs.


The most important step in understanding QAPs is realizing the difficulties and limitations of doing so. A common mistake is overestimating comprehension. Even experts in a state have only one perspective, and knowledge quickly becomes obsolete through lack of experience. Anyone interested in the results of a QAP should continually learn and accept the possibility of their perceptions being wrong.

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