HUD Report Examines Impact of QAPs on LIHTC Site Locations

Recent research has examined the siting patterns of Low-Income Housing Tax Credit (LIHTC) developments, but the reality is that the LIHTC program is not one uniform, national program. Rather, the program is administered by state allocating agencies, each of which has considerable discretion over how to allocate tax credits. In particular, each state issues a Qualified Allocation Plan (QAP), which outlines the selection criteria the state will use when awarding its 9 percent tax credits.

Some criteria are required by the federal government, such as setting aside at least 10 percent of credits for nonprofit developers and using the minimum amount of tax credit financing feasible. However, states are also allowed to adopt additional criteria that further the state’s housing policy and other goals, such as providing set-asides for developments with existing housing subsidies, including the HOPE VI Program, or awarding bonus points for locating developments in particular types of neighborhoods. In other words, QAP features vary considerably across states and often change radically within a state over time.

A recently issued HUD report examines whether and how the features of QAPs shape siting patterns of tax credit developments. In particular, it studied changes in the location criteria outlined in QAPs for 21 different states across the country between 2002 and 2010 and observed whether and how those modifications are associated with changes in the poverty rates of the neighborhoods where developments awarded tax credits are located.

Overall, even though there are still unanswered questions, the report found evidence suggesting that QAPs matter, that changes observed in QAP documents do, for the most part, correlate with changes in the ultimate location of tax credit developments. It found that overall states that increased priorities toward higher opportunity areas exhibited increases in the share of tax credits allocated for projects in low-poverty areas, decreases in the share of tax credits allocated for projects in high-poverty areas, as well as decreases in the overall exposure to poverty of projects allocated tax credits.