Help Rewriting QAPs Provides Opportunity for Clarity, Simplification
Sometimes potentially stressful situations–such as major staffing changes–can be an opportunity to improve existing systems. Novogradac Consulting LLP assisted the Arizona and Kansas low-income housing tax credit (LIHTC) allocating agencies to rewrite their qualified allocation plans (QAPs) from scratch, starting from what was truly a blank page. In each instance the catalyst for doing so was consequential staff turnover. At the same time, both agencies also saw a chance to improve their processes and outcomes.
When the previous LIHTC manager of the Kansas Housing Resources Corporation (KHRC) announced his impending departure in 2019, he had handled the award and underwriting processes for 28 years. He did so almost entirely on his own. The other staff had little if any involvement in the work.
In 2021 the Arizona Department of Housing (ADOH) lost its executive director, deputy director and long-serving manager of rental housing. Ruby Dhillon, the assistant deputy director, was the only person in leadership with responsibility for LIHTC who remained.
Fortunately, both agencies were able to recruit extremely capable replacements:
- Alissa Ice returned to her native Kansas after years of experience in underwriting and administration with the allocating agency in Missouri.
- Sheree Bouchee led housing programs in multiple localities across Arizona (most recently in Phoenix) before moving to the state level.
Despite their impressive backgrounds, neither had specifically been on point to manage LIHTCs. Absent a change in direction, they would inherit QAPs that had evolved over decades to reflect the priorities and preferences of their predecessors.
LIHTCs and Other Sources
According to the National Council of State Housing Agencies Factbook, the following were the size of each state’s LIHTC activity in 2020:
- $22,201,652 annual 9% LIHTCs
- $38,995,687 requested (applications)
- resulting in 1,028 units among 14 properties
- $8,575,916 annual 9% LIHTCs
- $13,922,867 requested (applications)
- resulting in 628 units among 16 properties
Additionally, KHRC uses its QAP to award HOME program loans to LIHTC developments and ADOH was set to implement a recently enacted state LIHTC. QAPs also control the 4% LIHTC associated with tax-exempt private activity bonds.
The remaining and incoming leadership of the agencies determined both a need and opening to radically overhaul their criteria. These new LIHTC managers deserved an opportunity to create their own systems, plus certain crucial aspects had grown unworkable and/or unpopular over time. The extent of changes required meant that amending the existing text was impractical–it was time to start over.
However, while necessary, a total rewrite was clearly a daunting task. As described above, each QAP is responsible for a substantial amount of affordable rental real estate production.
The agencies reached out to Novogradac for help. As of the start of the Kansas engagement in late 2019, I had revised 23 QAPs in 10 states, which was very likely more than anyone currently working in LIHTCs. (Since then, the total has increased to 38 QAPs in 16 states.)
Before 2020, the previous manager served with substantial autonomy and made award recommendations to an internal committee. New KHRC leadership took the steps described below to strengthen checks and balances plus ensure all stakeholders were being served.
In preparation for creating a new system, KHRC conducted meetings with key interested parties early in the process. More ambitious was a planned multicity listening tour to gather feedback, although unfortunately the COVID-19 pandemic forced a cancellation. Instead, the public process consisted of sharing preliminary policy concepts, invitations to submit comments and online meetings.
One of the defining features of the resulting 2021 QAP was creating set-asides, or distinct competitions, between rehabilitation and new construction. Doing so allowed the use of different selection criteria, which is appropriate since the activities are different.
While the previous QAPs included many considerations, a complicated “Building Efficiency” tiebreaker calculation of buildings’ dimensions was particularly consequential in 2021 and before. Many developers were frustrated with how it effectively forced certain physical design choices.
ADOH cast a wide net for input, starting with 10 tailored online focus groups (115 attendees in total), followed by four public comment periods and six formal public hearings. More than 50 parties submitted hundreds of letters and emails.
Like Kansas, the 2022-23 Arizona QAP has separate set-asides for rehabilitation and new construction, plus one for developments on tribal land. The selection criteria for each focused on creating scoring distinctions and expanding the geography of competitive applications. Additional provisions assisted previously awarded developments facing funding gaps and/or development delays.
In addition to the many substantive changes, Novogradac’s graphic designers created new looks, including distinctive section headings reflecting the agencies’ color schemes. Appearance can make a real difference in comprehension. The documents also are substantially shorter:
- the length of the Kansas QAP went from 20,000 words in 2020 to 11,000 in 2021 (45% reduction), and
- Arizona’s went from 47,000 words in 2021 to 16,000 in 2022 (66% reduction).
The improvements described above made the states’ policies materially more accessible, which has been very well-received by developers and other interested parties. Along with the substantive revisions, the result is both agencies being well suited to handle existing and future challenges.