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State of Maryland and HUD Sign LIHTC Fair Housing Settlement

The State of Maryland and HUD’s Office of Fair Housing and Equal Opportunity signed a Voluntary Compliance Agreement (VCA) concerning a Maryland policy that required a local jurisdiction’s approval before Low Income Housing Tax Credits (LIHTCs) could be awarded to a project. The Baltimore Regional Housing Campaign alleged on October 31, 2011, that the local approval policy in the state’s Qualified Allocation Plan (QAP) violated Title VIII of the Civil Rights Act of 1968 by discriminating on the basis of race, national origin, and family status because it prevented the placement of LIHTC projects in predominantly white areas for discriminatory reasons.

The VCA defines “local approval” to include requiring a local financial contribution, a letter of support from an elected official, or a resolution of support from a local legislative body. The Internal Revenue Service (IRS) issued Revenue Ruling 2016-29 stating that the IRS Code does not require or encourage state agencies allocating LIHTCs to reject proposals that do not obtain the approval of the locality where a project is proposed to be developed (see Memo, 12/19/16). The IRS pointed out that if a LIHTC allocating agency required or gave preference to projects that secured local approval, a pattern is created that allocates tax credits to projects in predominantly lower income or minority areas, perpetuating residential and economic segregation. Such a practice, “therefore, has a discriminatory effect based on race,” which is a protected class under Title VIII.

Key provisions of the VCA that went into effect on September 22 include:

  • The state agreed to remove the local approval requirement from the QAP and not to reinstate one or to impose new threshold scoring criteria requiring local approval.
  • Family housing projects in communities of opportunity will continue to be eligible for a basis boost (extra LIHTC equity).
  • The state will ensure that at least 1,500 units of family housing financed with LIHTC are developed in communities of opportunity. At least 1,050 of these units will be net new construction units. Up to 250 units may be developed through acquisition and rehabilitation of housing not previously subsidized through a government program. In addition, up to 200 units may involve the preservation or replacement of previously subsidized or assisted family housing.
  • The state will revise its Transit Oriented Development scoring criteria by awarding the full complement of points to family housing proposed in communities of opportunity that:
    • Is located within a two-mile radius of a planned or existing bus or transit rail stop (instead of a one-mile radius which is difficult to achieve in suburban areas), or
    • Provides alternative forms of free or subsidized transportation services such as vans, microtransit, or car purchase programs. The alternative services cannot be limited to serving elderly or disabled residents.
  • The state will adjust the QAP incentive for units with more than two bedrooms.

More about the LIHTC program is on page 5-30 of NLIHC’s 2017 Advocates’ Guide.