HUD Publishes 2016 QCTs and DDAs

HUD recently published a notice designating difficult development areas (DDAs) and qualified census tracts (QCTs) for 2016. A DDA for the LIHTC program is an area designated by HUD with high construction, land, and utility costs relative to its area median gross income (AMGI). DDAs are eligible for tax credits at 130 percent of qualified basis, meaning that a greater percentage of the development costs are funded by the tax credit than in areas not designated a DDA.

HUD also announced it will delay the effective date of 2016 small area difficult development areas (SADDAs) from Jan. 1 to July 1, 2016, due to the extensive changes in the designations. Beginning with the 2016 DDA designations, it was announced that metropolitan DDAs will use Small Area Fair Market Rents (FMRs), rather than metropolitan-area FMRs, for designating metropolitan DDAs. In other words, DDAs inside metropolitan statistical areas will be divided into ZIP codes instead of counties. Under the new 2016 SADDA methodology, HUD designated 311 metropolitan ZIP code areas in 45 states, the District of Columbia, and Puerto Rico as DDAs. As a comparison, in 2015, there were 35 metropolitan areas in 11 states plus Puerto Rico that HUD designated as DDAs.

This means that, this year, many metro areas that have never been designated as DDAs may be able to access the basis boost for bond-financed projects for the first time. Also for the first time, as indicated in the notice, HUD won’t count population in QCTs toward the DDA population cap, meaning there will be even greater geographic distribution of SADDAs and no overlap between SADDAs and QCTs.