Developing low income housing projects can be highly profitable, thanks to valuable tax incentives under Section 42 of the IRS Code of 1986 (as amended). The program authorizes states to allocate and issue housing credits on a competitive basis to projects that are determined to be in the public’s best interests.
Each state has its own Qualified Allocation Plan (QAP) for determining which projects will win these housing credits. Each QAP uses a scoring system. Developers submit project proposals, which are scored by the QAP administrator, and funds are awarded to the top-scoring projects.
Anyone who has ever attempted to win Qualified Allocation Plan funds knows that scoring can be highly competitive. Just a few points can make the difference between winning and losing.
While you can’t know in advance how many other projects will be submitted, nor how well they will perform, there is a lot you can do to maximize your score, and therefore your odds of winning. Each state’s criteria are publicly posted for your use. Georgia’s is here, and other state criteria can be found by Googling your state and the words “Qualified Allocation Plan.”
In addition to criteria specific to the project itself, most states also include location-specific scoring criteria. This is important to know, because the difference between one parcel and another may make the difference between winning funds and not winning funds. Fortunately, publicly available Geographic Information Systems (GIS) tools can help you identify the best parcel to maximize your QAP score, using these three steps.
Review your QAP and make a list of relevant location scoring criteria. Depending on your state, your project may gain points for proximity to any of the following:
You may also gain points for developing in designated brownfields areas or Transformational Communities. In addition to points for each amenity or criteria, you may also get points for meeting a certain number of location criteria. For instance, in Georgia, you receive one point for each location criteria, and an additional point if you meet at least three of them.
Your next task is to identify suitable parcels that are currently available in the area you propose to build in. Get parcel numbers and other identifying information on each one, and then use GIS to map their locations.
Some GIS data will be readily available to use, such as the location of hospitals and schools. Other data may require more digging or the purchase of premium information, such as the location of grocery stores.
For each parcel, develop a score based on the proximity of each relevant location criteria. Armed with a scored map of available properties, you can make informed decisions about where to locate your property to maximize your QAP score.
You may also want to consider hiring an experienced firm like GLE to help you maximize your QAP score on multiple criteria including location. Contact us today to see how we can help.