Survey: All States Consider Community Revitalization Plans for LIHTC Allocation

Published by Mark Shelburne on Monday, April 25, 2016 - 12:00am

The Internal Revenue Code (IRC) has few mandates for qualified allocation plans (QAPs). One of these covers the intense competition for low-income housing tax credits (LIHTCs). Under IRC Section 42(m)(1)(B)(III), agencies must give a preference to applications proposing “projects which are located in qualified census tracts and the development of which contributes to a concerted community revitalization plan.” The only other similar requirement is for developments serving the lowest income tenants for the longest periods.

Novogradac & Company LLP recently compiled a list of agencies’ criteria for addressing the community revitalization plan (CRP) preference (not all rules are in QAPs, some are contained in other documents). This review found that all states have some form of recognizing CRPs or an equivalent, including target areas or redevelopment plans.

But what does it mean to give a preference? The answer is different across the country. States’ approaches vary widely, as do the definitions of CRPs and extent of what applicants have to submit. Novogradac’s review revealed several interesting and unique policies.

  • Georgia awards points for being in a U.S. Department of Housing and Urban Development (HUD) Choice Neighborhood Implementation grant area, or additional points if near other benefits, such as quality education.
  • In Massachusetts applicants agree to annually measure the development’s effect on the surrounding neighborhood.
  • Illinois considers access to employment, healthcare, supportive services, parks, schools, groceries and other retail.
  • Pennsylvania asks if the CRP is consistent with the jurisdiction’s plan to affirmatively further fair housing (AFFH).
  • Texas has distinct criteria for urban and rural areas.

Some observers, including certain civil rights advocacy organizations, have been critical of CRP implementation. However provisions such as these clearly indicate agencies take the responsibility very seriously. That said, there is always room for adaptation and improvement.

As previously noted in this space, the Obama administration’s fiscal year 2017 budget proposal calls for adding another required QAP preference for considering AFFH in development siting. Unless such a provision is adopted, CRPs will have a uniquely consequential place in Section 42. Therefore, CRPs merit ongoing consideration.

Accordingly, Novogradac & Company will provide two opportunities to learn more. First, CRPs are one of many topics to be covered in the Novogradac QAP Fundamentals and Hot Topics Webinar, April 28. Andrea Ponsor, policy director for the Local Initiatives Support Corporation (LISC), will discuss the successful Building Sustainable Communities model and how LISC offices have implemented it in three cities.

Also, an article in the Novogradac Journal of Tax Credits will break down the CRP criteria based on different categories:

  1. Is the preference addressed as a set-aside, points or other?
  2. Are developments outside QCTs also eligible?
  3. Does there have to be official, formal local government approval?
  4. What else is necessary? Examples include funding commitments and evidence of surrounding investment.
  5. Are local land use plans enough?
  6. Do other federal or state agency designations contribute or qualify?
  7. How recently should the CRP have been put in place?
  8. What role, if any, can the applicant/developer have played in drafting?

In the meantime, contact a Novogradac professional with any questions.