HUD Publishes 2023 List of Difficult Development Areas and Qualified Census Tracts 2023

On October 25, HUD published its annual listing of Difficult Development Areas (DDAs) and Qualified Census Tracts (QCTs) for 2023 in the Federal Register. These determinations are used for the implementation of the Housing Credit program, as outlined under Section 42 of the Internal Revenue Code.

DDAs are areas in the 50 states, the District of Columbia, and U.S. Territories identified by HUD as facing high construction, land, and utility costs relative to area median gross income (AMGI). The determinations also included considerations based on modified Fiscal Year (FY) 2022 Fair Market Rents, FY 2022 income limits, and 2020 Census data and American Community Survey (ACS) data. Similarly, QCTs are designated by HUD for areas where either 50 percent or more of the households have an income less than 60 percent of the AMGI for that year or have a poverty rate of at least 25 percent. The QCT designation is based on new income and poverty ACS data, which includes the most recent three sets of data to ensure that abnormal estimates caused by sampling variance do not affect the QCT status of tracts.

State Housing Finance agencies may use these determinations to provide a basis boost of up to 30 percent for Housing Credit projects located within these federally designated DDAs and QCTs, if the agency determines the increase is necessary to make the project financially feasible. These basis boosts can be a critical way to allow a property to generate more equity and keep rents lower for tenants. These incentives may help to increase the supply of housing in areas where a ratio of high inherent costs to low area incomes can otherwise challenge prospects for development.

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