HUD Publishes 2016 QCTS and DDAs Using New Small Area DDA Methodology

HUD Publishes 2016 QCTS and DDAs Using New Small Area DDA Methodology
Posted: 11/20/2015
Today, HUD published on its website the 2016 Difficult Development Areas (DDAs) and Qualified Census Tracts (QCTs), which are eligible for the 30 percent basis boost under the Housing Credit program. As HUD has long planned, the methodology for determining 2016 metropolitan DDAs relies on new Small Area Fair Market Rents, and thus result in 311 zip code level small area metropolitan DDAs across 45 states, the District of Columbia, and Puerto Rico. This compares to 35 full metropolitan statistical areas in 11 states plus Puerto Rico that HUD designated as DDAs in 2015.

While in most years new DDAs and QCTs become effective on January 1, because of the change in DDA methodology, HUD is postponing the effective date of both 2016 QCTs and DDAs until July 1, 2016. This means that projects located in an area that was a DDA in 2015, but will lose its DDA status in 2016, are still eligible for the basis boost so long as the state agency receives the complete project application from the developer by June 30, 2016.

The HUD notice also extends the period during which the 2016 DDAs will be effective from 365 days to 730 days. For example, if a project is located in a 2016 DDA that loses its DDA status in 2017, the project will be eligible for the basis boost so long as the complete application is filed by December 31, 2016 and the state agency allocates Credits to the project within 730 days from the date the applicant submitted the application or, in the case of Housing Credit properties financed with bonds, the state agency issues bonds and the project is placed in service within 730 days after the applicant submits its completed application. The HUD notice provides various example scenarios illustrating when the 2016 DDAs are applicable to better explain how this will work in practice.

HUD has told NCSHA that it expects to return to a January 1 effective date in 2017 and future years.

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