A recent report by the Poverty & Race Research Action Council (PRRAC), “Building Opportunity III,” tracks the implementation of civil rights provisions in state Qualified Allocation Plans (QAPs), finding that improvements have been made nationwide to combat the concentration of Low-Income Housing Tax Credit (LIHTC) developments in high poverty and segregated neighborhoods. The report compares data from a 2015 survey, “Building Opportunity II,” with the state of current QAPs across four categories: local contribution and approval requirements and incentives, encouragement towards high opportunity areas, tenant selection and affirmative marketing, and contribution to concerted community revitalization plans (CCRPs).
Allocation plans that require or incentivize local governments to support LIHTC developments effectively grant municipalities full veto power over new LIHTC developments, which often discourages developers from even proposing projects that will be subject to community opposition. Following a ruling from the IRS and best practice recommendations from the National Council of State Housing Agencies, many states began to eliminate requirements or incentives for local approval or contributions to LIHTC developments. In 2015, 24 states awarded points in their QAPs for local approval or contributions, a number that fell to 12 by 2023. Similarly, while 12 states required local approval or contributions in 2015, only eight continued this practice in 2023.
Some QAPs encourage LIHTC development in “high opportunity” areas with access to high performing schools, jobs, food, healthcare, and other amenities. PRRAC researchers found only six states with incentives to place developments in high opportunity areas in 2015, but this number rose to 29 by 2022, with many states also including detailed metrics defining the qualifications of these areas to further aid the improvement of LIHTC developments. Seventeen states outlined specific metrics for education in their indices, and 10 provided specific incentives for developments in opportunity areas that served families with children. Nineteen states provide opportunity maps to clearly delineate opportunity areas.
Regarding tenant selection, 31 QAPs mention the need for affirmative marketing strategies that target historically marginalized households. However, while discrimination against housing choice voucher holders has been barred since 1993 in the LIHTC program, most QAPs only reference this prohibition as a requirement but do not go into further detail. At least 12 states require LIHTC owners to annually certify that they have not discriminated against voucher holders based on their source of income. Only a few QAPs state that owners who discriminate against voucher holders will be disqualified from future tax credit allocations.
The LIHTC program incentivizes developers to build in low-income areas known as Qualified Census Tracts (QCTs) by providing up to 30% more tax credits than could be received by identical projects outside of QCTs. A 2016 IRS ruling reiterated that LITHC developments in QCTs must contribute to a concerted community revitalization plan (CCRP). The ruling did not provide an exact definition of CCRPs but requires, at a minimum, that LIHTC developments be part of a larger community-wide project. PRRAC found that only 15 states had QAPs with explicit definitions of CCRPs in 2015, but 42 QAPs had been updated to include them by 2022. While these CCRP definitions vary in quality and substance from one QAP to another, PRRAC researchers note this progress as a significant step forward.
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