Analysis of State Qualified Allocation Plans Shows Trends in LIHTC Awards

When making Low Income Housing Tax Credit (LIHTC) awards to developers, 88% of states gave preferences for projects proposing to provide housing for elderly residents, according to "Analysis of State Qualified Allocation Plans for the Low Income Housing Tax Credit Program," a new report from HUD's Office of Policy Development and Research.

LIHTCs are the largest source of federal subsidies for adding new or rehabilitated rental housing units to the affordable housing stock in the United States. The Internal Revenue Service requires state agencies responsible for awarding LIHTC to submit annual Qualified Allocation Plans (QAPs) explaining the basis on which they distribute their LIHTC allocations. Based on their QAP, states establish preferences and set-asides within their tax credit competitions so as to target the credits toward specific places or types of people. Targeted groups included the mentally or physically disabled, elderly, homeless, minorities, and large families.

HUD commissioned a study of QAPs in order to increase understanding of trends in the decision-making processes behind tax credit allocations and create a basis for additional LIHTC program research. This report examines how preferences and set-asides were used and changed based on content analysis of 1990 and 2000 QAPs from nearly every state, along with discussions with the staff that originally prepared the plans. More specifically, it reviews each state's QAP for 1990, 2000, and 2001, and records both set-asides and preferences in each of eight basic categories:

• Geographic location,
  
• Local housing needs,
  
• Financing,
  
• Resident characteristics,
  
• Project activities and types,
  
• Building characteristics,
  
• Sponsorship and costs, and
  
• Affordability.

States tended to vary widely in their levels of activism for people- and place-based preferences and set-asides. While there appeared to be no general shift, at least half of the states increased their place-based provisions. Furthermore, states that primarily focused on either people- or place-based preferences in 1990 tended to shift the composition of their QAPs to move towards greater balance by 2001. States that were balanced in 1990 generally increased their levels of place-based activism in 2001.

"Analysis of State Qualified Allocation Plans for the Low Income Housing Tax Credit Program" may be ordered from HUD USER for $5. The report is also available for download from HUD USER at www.huduser.gov.