September 3, 2015
The Credential
New DDA Policy Hurts Some, Offers Opportunities to Others

HUD’s Office of Policy Development and Research has announced a major change in the way difficult development areas (DDAs) will be defined beginning in 2016. The new policy will drastically alter the map of areas that qualify for the 30% credit boost in the Low-Income Housing Tax Credit (LIHTC) program.

Under the current system, metropolitan DDAs tend to be geographically concentrated. The 33 metropolitan DDAs are located in only 10 states, and 21 of the 33 are in either California or Florida.

HUD’s new policy for metro areas will set small DDAs (SDDAs) at the level of individual zip codes, but territory outside metros will not be affected. A hypothetical table for 2015 shows that if HUD had implemented the policy this year, parts of more than 280 metros in 46 states would have qualified for SDDA status.

A national population cap for metro DDAs is still in effect — and unchanged — so the new policy will take DDA status away from large sections of certain metro areas in a few states and transfer it to many different metros spread more evenly across the country. 

HUD made this decision without soliciting public comment. NAHB seldom endorses a policy that creates winners and losers among its members based on geography. However, it’s worth notifying our members that some parts of the country will clearly be net winners.

Tax-credit developers will probably want to consult HUD’s hypothetical 2015 table to see if any new territory in markets where they want to develop is likely to become eligible for the 30% credit boost next year. Keep in mind that the 2016 list of SDDAs, when published, will not be identical to the hypothetical list for 2015.

For more information, email Paul Emrath, or call him at 800-368-5242 x8449.