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LIHTC Allocating Agencies’ Initial Implementation of Income Averaging

June 12, 2018


At the time of this writing, eight state low-income housing tax credit (LIHTC) allocating agencies have made statements or issued guidance about how they will implement the new set-aside option known as income averaging (IA).  Other allocating agencies around the country likely will look to these examples.

Background

As described in a previous Notes from Novogradac entry, IA became part of Section 42 on March 23. The new provision allows apartments in LIHTC properties to serve households earning as much as 80 percent of area median income (AMI) so long as a corresponding number of apartments target levels below 60 percent AMI.

The concept was among more than two dozen proposals in the Affordable Housing Credit Improvement Act introduced in the current and prior sessions of Congress. When affordable housing champions in the House and Senate identified an opportunity to advance some the AHCIA the March 2018 omnibus spending bill, the legislation came together very quickly. In other words, IA was a pleasant surprise from Washington.

Although a very positive change, a consequence of the unexpected outcome is that LIHTC allocating agencies are starting from scratch to incorporate the allowance into their application reviews, qualified allocation plans (QAPs) and other processes. The work is not easy. Substantively, IA is one of the most consequential and complicated program revisions in at least a decade.

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