Request for Committee Action
A briefing memo explaining the purpose, background, and impact of the requested action.
Updates for the Year 2024-2025 Housing Tax Credit Qualified Allocation Plan (QAP) and Procedural Manual (RCA-2023-00519)
ORIGINATING DEPARTMENT
To Committee(s)
| # | Committee Name | Meeting Date |
|---|---|---|
| 1 | Business, Inspections, Housing & Zoning Committee | May 16, 2023 |
Action Item(s)
| # | File Type | Subcategory | Item Description |
|---|---|---|---|
| 1 | Action | Housing | Authorizing the described changes to the 2024-2025 Housing Tax Credit Qualified Allocation Plan (QAP) and Procedural Manual. |
Ward / Neighborhood / Address
| # | Ward | Neighborhood | Address |
|---|---|---|---|
| 1. | All Wards |
Background Analysis
The Low Income Housing Tax Credit Program (HTC) is a federal program that provides a reduction in tax liability to owners and investors of qualified low-income rental housing. The program can be used for new construction or rehabilitation/preservation and provides investors with an annual tax credit for a ten-year period, in exchange for an equity investment in a qualified project.
CPED assists the Minneapolis/Saint Paul Joint Housing Finance Board (the Joint Board) with allocating HTCs in Minneapolis. For Year 2024, Minneapolis is expected to receive $1,392,362 in 9% HTCs for allocation.
Federal law requires tax credit allocating agencies to adopt a Qualified Allocation Plan (QAP) and Procedural Manual, which set forth selection criteria for the allocation of HTCs to qualified rental housing developments. Program changes in State and Federal law are also made from time to time, and must be incorporated in the QAP and Procedural Manual. Minnesota has a state-level allocating agency (Minnesota Housing) and four suballocators, including Minneapolis (through its participation in the Joint Board).
This year, staff is proposing several procedural and scoring updates to the QAP and Procedural Manual to conform with current Federal and State regulations and national best practices in HTC allocation, to establish greater consistency with Minnesota Housing, and to further align the City's HTC program with City goals.
Staff sent the draft QAP and draft Procedural Manual out for public review, with comments to be returned no later than May 3, 2023. Three public comments were received which are attached to this report. One comment outlined support for a requirement that all HTC projects to have a smoke-free policy. The current language in the 9% HTC scoring incentivizes non-smoking policies through a dedicated point category. This year staff is recommending adding that same language to the 4% HTC scoring to be consistent between the types of projects. Staff support low-barrier housing strategies and believe that housing providers are best positioned to make non-smoking policy decisions based on the project and target population served.
A second comment recommends that projects with an existing 9% HTC award receive priority consideration in scoring. Because this proposed change would require additional analysis of the overall 9% scoring approach, staff will consider it for the next QAP update.
The third comment supports the proposed changes to Average Income rules and recommends process guidance for changes to existing Average Income projects. Tax credit counsel has reviewed the proposed Average Income changes and has advised no additional updates are needed.
Staff also presented the proposed program changes to the Housing Advisory Committee on April 14, 2023. The drafts were also reviewed by the Joint Board's HTC counsel - Kutak Rock.
Below is a summary of all proposed changes:
Proposed Changes to the 2024-2025 Housing Tax Credit Qualified Allocation Plan (QAP)
- Attachment 1 - Selection Criteria - 9% Tax Credits:
- A8: Clarify funding source requirements for Supportive Services Commitments
- A10: Clarify Intermediary Costs language at time of IRS Form 8609 submission
- A13: Revise Equitable Development point language to align with Minnesota Housing scoring. The language updates relate to the documentation required for points.
- Attachment 3 - Selection Criteria - 4% Tax Credits:
- 1: Delete language regarding projects with no gap financing from the Capital Funding Commitment criterion.
- 3. Clarify Intermediary Costs language at time of IRS Form 8609 submission
- New 10: Create a new scoring criterion to incentivize non-smoking policies. This new scoring criterion is consistent with the existing 9% HTC scoring.
Proposed Changes to the 2024-2025 Housing Tax Credit Procedural Manual:
- Section III – E: Clarify language that displacement and relocation requirements apply to new construction projects.
- Section III – K: Delete section about 2021 census tract boundary updates – no longer applicable.
- Section IV – D3: Update Average Income Test (AIT) language to align with Minnesota Housing’s QAP regarding unit parity, AMI tiers, floating units, and other AIT set-aside requirements.
- Section IV – J: Delete language about floating 4% Applicable Percentage – no longer applicable.
- Section VI – B: Add language about market study effective dates.
- Section VII – Submission Requirements: various updates to 4% and 9% HTC application requirements.
- Section VIII – C: Add language that a project receiving HTCs apportioned from Minnesota Housing must pay an allocation fee to the City of Minneapolis for projects in Minneapolis or the Saint Paul HRA for projects located in Saint Paul.
The Joint Board is scheduled to meet in late May to finalize and approve the QAP and Procedural Manual for Minneapolis and Saint Paul. The Joint Board meeting includes a public hearing. Staff anticipates releasing the Year 2024 9% HTC Notice of Funding Availability (NOFA) in mid-June.