HUD announced on August 15 a new requirement for Low-Income Housing Tax Credit (LIHTC) projects that participate in Federal Housing Administration (FHA) Multifamily rental and Risk Share programs. According to the new requirement, LIHTC project owners seeking access to these FHA programs will be required to waive their right to the Qualified Contract (QC) provision in the LIHTC statute. The new requirement will apply to projects starting in 2025.
Under the QC loophole, LIHTC owners can discontinue federal and state affordability restrictions after just 15 years rather than the usual 30 years required by the program. For this reason, the QC loophole has resulted in a substantial loss of affordable rental homes, harming low-income residents and wasting scarce federal resources. Fully eliminating the QC loophole would help protect the affordability of LIHTC properties by holding developers to the 30-year minimum affordability period.
NLIHC and other advocacy organizations have sought to end the QC loophole for many years. NLIHC will submit a comment in support of the new requirement and urges other advocates to consider submitting a comment to demonstrate widespread support for ending the loophole. Instructions for submitting a comment can be found here. Comments are due by 3 pm ET on September 20, 2024.
With major tax reform likely in 2025, NLIHC will continue to push for LIHTC reforms that focus on households with the greatest needs, including by addressing the QC loophole directly in Section 42 of the Internal Revenue Code.