Commenting on the NC Qualified Allocation Plan

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CED Program Interns & Students

http://www.tcgdevelopment.com/projects_winston.htmEvery year the North Carolina Housing Finance Agency (NCHFA) reviews the Qualified Allocation Plan (QAP) that describes the selection criteria for developers submitting projects for Low-Income Housing Tax Credits (LIHTC). LIHTC credits provide developers the ability to feasibly develop affordable housing. During the revision process, developers can submit comments regarding the previous QAP.

As of late October, the NCHFA had received over twenty-five comments. The NC QAP affects developers in NC as well as in neighboring states with five of the submitted comments coming from developers outside of NC. In addition to comments by private developers, nonprofit organizations and law firms also provided comments. Three topics that were frequently raised in the comments relate to the principal cap, tiebreaker method and developer experience. 

Principal

About a quarter of the comments discuss the total tax credits that the NCHFA can award to a principal. The current maximum is set at $1.8 million. Only one organization, United Developers, suggested that this maximum be raised. Two organizations, Laurel Run Management Group and Affordable Housing Management, believe that the maximum should be reduced to $1.5 and $1.4 million respectively.

Tiebreaker

The tiebreaker methodology was raised in nine comments with two of those comments indicating support for the current system. Stephen Brock expresses his support by stating that “Financial efficiency is and should remain the deciding factor.” The maximum site score is sixty under the 2015 QAP. Out of 148 applications, 144 had scored sixty points. Every project that was awarded with low-income housing tax credits had a perfect score, outside of the projects that had tax-exempt bonds. Thus, the tiebreaker methodology is critical to the selection process.

The first tiebreaker ranks higher projects that are “requesting the least amount of federal tax credits per unit based on the Agency’s [NCHFA] equity needs analysis.” Although there are multiple tiebreakers, only concerns with the first tiebreaker were raised. The Charlotte Mecklenburg Housing Partnership suggests in their comment that this tiebreaker “encourages lower quality construction.” Another group not in favor of the current tiebreaker, The Woda Group, in their comment state that they have “noticed that developers are underwriting their projects using higher rents.”

Developer Experience

Another topic that was raised in a third of the comments as part of the 2016 QAP draft process was developer experience. In order to achieve a perfect score under the 2015 QAP, “at least one Principal must have successfully developed, operated, and maintained in compliance one Tax Credit project in North Carolina” in service between 2008 and 2014. Plus, the principal has to meet one of following criterions: “(i) was a Principal in seven awards of 9% Tax Credits in North Carolina from 2008 through 2014, or (ii) has her/his/its principal office in North Carolina.” Two groups, Erwin, Bishop, Capitano & Moss and The Woda Group raised legal concerns regarding some of these requirements with the first group indicating that the QAP is violating the dormant commerce clause.

On September 28 the NCHFA released their first draft of the 2016 QAP. In this draft, the NCHFA actually removes “The points for a Principal having its principal office in North Carolina or seven awards in a certain time frame.” This removal could potentially increase eligibility for organizations operating outside of North Carolina. However, this revision is not final at this time.

By keeping the revision process open, the NCHFA can continue to update the Qualified Allocation Plan based on the experiences of developers building affordable housing in North Carolina.

This is the second post in a series of posts looking at Low-Income Housing Tax Credit (LIHTC) process in North Carolina – check out this post for a primer on LIHTCs.

Omar Kashef is a second-year graduate student seeking a dual-degree in Public Administration and Information Science and is currently a Fellow with the Development Finance Initiative.

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