Page 7 - Balancing Priorities
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BALANCING PRIORITIES: Preservation and Neighborhood Opportunity in the Low-Income Housing Tax Credit Program Beyond Year 30 Rental assistance is a key factor in achieving affordability for the lowest income renters in the LIHTC program. More than 44% of LIHTC households report incomes at or below 30% of AMI and 32% report incomes between 31% and 50% of AMI (HUD, 2018). In a national sample of LIHTC households, O’Regan and Horn (2013) observed that 28.4% of LIHTC households with incomes at or below 30% of AMI and 11.4% of those with incomes between 31% and 50% were severely cost- burdened, devoting more than half of their income to housing costs. Approximately 70% of LIHTC households with incomes at or below 30% AMI received some form of additional rental assistance. Among LIHTC households with income at or below 30% of AMI who did not receive rental assistance, 58% reported severe cost-burdens. The Duration of Affordability Requirements LIHTC projects allocated credits prior to 1990 were subject to a minimum 15-year affordability period. For projects placed in service since 1990, federal law requires the affordability period to remain in place for a minimum of 30 years. The  rst 15 years are commonly referred to as the compliance period and the subsequent 15 years are known as the extended use period.1 Reporting by the owners to the IRS ceases and program compliance monitoring becomes the responsibility of HFAs at the end of the compliance period (i.e. Year 15).2 Following the end of the extended use period in Year 30, LIHTC properties are no longer subject to LIHTC requirements, including income and affordability restrictions, and mandatory non-discrimination against HCV holders. The devolved administration of the LIHTC program, however, allows state HFAs to incentivize or require affordability periods beyond 30 years. Federal law still allows owners to exit the LIHTC program after Year 15 under certain conditions. Owners of properties placed into service after 1989 can submit a quali ed contract (QC) starting in the  rst year of the extended use period. Once an owner initiates the QC process, the state HFA has one year to  nd a buyer who will purchase the property at the quali ed contract price and continue to operate it as affordable housing under program guidelines. If the HFA cannot  nd a buyer during this time, affordability restrictions for the property are eliminated over a three- year period, after which the owner can operate the property free of LIHTC requirements in the private-market. 1 The extended use period was established in the Revenue Reconciliation Act of 1989. 2 It is uncertain how extensively HFAs currently track and enforce affordability requirements after the end of the compliance peri- od. Further research is needed on this issue. NATIONAL LOW INCOME HOUSING COALITION AND THE PUBLIC AND AFFORDABLE HOUSING RESEARCH CORPORATION 7 HFAs also have regulatory  exibility in implementing the QC process. Some HFAs provide incentives or requirements in their QAPs for LIHTC developers to forego their right to a QC. Some HFAs also appear to make the QC process so burdensome as to be unworkable (Khadurri, Cilmaco, & Burnett, 2012; Schwartz & Meléndez, 2008). Based on their review of QAPs and interviews with key stakeholders, Khadurri et al. (2012) concluded that QC sales tend to be concentrated in a few states and are uncommon. Results from a recent survey of 35 HFAs af rm that QC sales tend to be concentrated in a few states, MORE THAN 44% OF LIHTC HOUSEHOLDS REPORT INCOMES AT OR BELOW 30% OF AMI AND 32% REPORT INCOMES BETWEEN 31% AND 50% OF AMI. 

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