On August 15, HUD announced a significant policy change that will impact Low-Income Housing Tax Credit (LIHTC) projects participating in Federal Housing Administration (FHA) Multifamily rental and Risk Share programs. Starting January 1, 2025, LIHTC project owners seeking access to these FHA programs will be required to waive their right to the Qualified Contract (QC) provision under the LIHTC statute. This new requirement is set to address long-standing concerns about the QC loophole, which has allowed some affordable housing properties to bypass long-term affordability requirements after just 15 years.
Why This Change Matters
The Qualified Contract loophole, a provision in the LIHTC program, permits property owners to end federal and state affordability restrictions after 15 years, instead of the full 30 years mandated by the program. This has resulted in a loss of affordable rental homes, negatively impacting low-income residents and wasting crucial federal resources. By requiring a waiver of the QC option, HUD aims to ensure that affordable housing properties maintain their affordability for the entire 30-year period, protecting these vital resources for those in need.
Key Details:
- Effective Date: January 1, 2025
- Applicability: FHA Multifamily rental projects and Risk Share transactions for which a firm commitment or Firm Approval Letter (FAL) is issued on or after December 31, 2024.
- Impact: Project owners must demonstrate they have unconditionally waived their QC right and agree to maintain affordability for the full 30-year period.
Objectives of the New Requirement
HUD’s new guidance aims to:
- Increase Housing Stability: Ensuring properties remain affordable for the full 30 years supports long-term stability for residents.
- Protect Affordable Housing Stock: By closing the QC loophole, HUD helps prevent the loss of affordable rental homes.
- Promote Fair Housing: The requirement supports HUD’s broader goals of maintaining and expanding affordable housing opportunities in diverse communities.
How to Provide Feedback
HUD is seeking public feedback on this new policy. Comments are due by 3 p.m. ET on September 20, 2024. Stakeholders can provide written feedback via email to [email protected] with the subject line: “Qualified Contract Loophole in the Low-Income Tax Credit Program.”
For further details and to submit comments, you can access the draft notice here and response worksheet here.
For additional information, please contact Willie Fobbs III, Director, Office of Multifamily Production at [email protected].