The Housing Tax Credit’s Impact on Qualified Allocation Plans (QAPs)

Housing Tax Credit and QAPs

When we talk about health and the measures we take to maintain it, we typically think in terms of our bodies. The food we eat, our exercise routines, and the way we take care of ourselves physically. What we may not think about –– even though it is intrinsically linked to our sense of wellness –– is where we live.

As the saying goes, home is where we hang our hat, but our living situation dictates so much more than the placement of our headwear after a long day. Housing provides geographical access to the things we need to maintain good health: grocery stores, affordable eateries, and parks and recreational exercise facilities, for example. Our home should also make us feel safe, provide location-based accessibility to healthcare, and to the public transit that gets us there. Housing is the gatekeeper to our health and wellness –– and if we don’t have access to good housing, that gate can be tough to get through.

Unfortunately, the facilities that promote good health are often considered luxuries or conveniences and not necessities. Thus, higher-income occupants battle it out for higher-priced rental housing, driving up costs for those who couldn’t afford to live there in the first place.

This leaves low-income housing residents to choose from options in less safe neighborhoods with limited access to health-promoting necessities. The catch-22 of this is that lower-income residents end up having to pay more for these necessities because they have to travel further to gain access to them. Ultimately, “affordable housing” is very often synonymous with “bad housing.”

The Low-Income Housing Tax Credit

To combat this unsettling practice and to give those with lower incomes access to better, health-promoting housing, the Low Income Housing Tax Credit (LIHTC) was developed. This measure, which came to fruition in 1986 and was made permanent in 1993, was created to motivate builders to provide affordable, high-quality housing to low-income residents.

The LIHTC provides a credit to those builders who are able to allocate parts of their residences to those who other wouldn’t be able to afford living there. Each year, states are given an amount of credits to distribute via a state agency –– usually a housing finance agency (HFA) –– to builders who qualify. But how do these state agencies determine and standardize the terms on which builders can qualify? Enter the Qualified Action Plan.

What is a Qualified Action Plan?

A Qualified Action Plan (QAP) is a vehicle for determining the guidelines by which builders are eligible for receiving the tax credit, and is developed by HFAs on a state-by-state basis. Since these guidelines are malleable and can change over time, housing advocates do what they can to influence the state agencies that assess the QAP to push their own agendas; motivations might include maintaining existing affordable housing, or lobbying for the development of housing in higher-opportunity neighborhoods that have not yet seen LIH.

How Do Housing Tax Credits Impact QAPs?

While the impacts on QAPs by LIHTC are not always clear, studies have shown that there are some correlations. A recent article called, Points for Place: Can State Governments Shape Siting Patterns of Low-Income Housing Tax Credit Developments, provided evidence on a study related to the Impact of LIHTC on QAP’s. The authors of this study analyzed the QAP standards in 20 states in 2002 and 2010, and examined the subsequent LIHTC allocated in those states during those years.

What they found was that those states who used their QAPs to favor development in higher-opportunity areas saw increased shares of LIHTC allocated towards builders in low-poverty neighborhoods, but a decrease in tax credits allocated for minority neighborhoods. Developers may have sought opportunities to build in these higher-opportunity areas because they were directly motivated by QAPs, but unfortunately this isn’t completely implicit. According to the authors, more research will have to be done to provide concrete correlations.

Builders and developers should know that state-specific QAPs should be taken into serious consideration when planning for new housing. According to this study, QAPs are best viewed “as critical planning tools,” and that developers should “pay careful attention to the neighborhood priorities they communicate.”


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