Experts Discuss the Pros & Cons of a 2-YEAR QAP

Nathan Kelley, TAAHP QAP Committee Chairman

The topic of whether or not to support, and advocate for, a two-year Qualified Allocation Plan (QAP) has been hotly debated over the years. Year after year, TAAHP members have discussed the nuances of the various aspects of the Texas QAP. Numerous meetings and hours of discussion result in a lengthy list of recommendations to the Texas Department of Housing and Community Affairs to advocate for a myriad of changes which are intended to streamline the application while encouraging the highest and most sustainable quality of development. Depending on who you ask, you are likely to hear a series of reasons why or why not Texas should move away from an annual QAP to a bi-annual one.

Most recently, two bills were introduced in the 87th Texas Legislature that would have mandated such a change. While neither passed, the debate continues, leaving us to ponder the pros and cons of such a shift. As chairman of TAAHP’s QAP committee, I reached out to my colleagues to give me their thoughts on the subject. And while this list is not exhaustive of what many industry professionals have to say on the matter, their responses offer some very valid points that are worthy of consideration.

ON THE + SIDE

A bi-annual approach would provide for more consistency in rule making over a two-year period.

Without annual modifications, application materials would be better and should result in the release of application materials sooner. In 2021, it was problematic that a final application was not available until about a week and a half before the freeze event happened. Even without the weather event, the timing was delayed and created an environment unnecessarily rushed completion timelines.

A 2-year QAP allows for more fully formed development plans in the second year and expands the ability to spend time on thoughtful design and engagement with community stakeholders. Pre-development costs would be more effectively spent by developers since the 2-year cycle allows developers to know that they are working on sites which could be competitive over two consecutive cycles.

The current single-year QAP puts applicants “under the gun” as the QAP is not finalized until December of each year and pre-applications are due less than 30 days later. A 2-year QAP would eliminate this undue pressure in at least the second year of the approved plan.

A 2-YEAR QAP WOULD PROVIDE MORE CERTAINTY

In terms of 4% tax credits, a 2-year QAP gives developers added time for long range planning without the risk of significant changes to the program requirements. Given the bond volume over subscription, it will be important for developers to be able to pursue a pre-allocation development plan that can last up to 24 months. When you sign up a 4% deal in 2021, there is almost no chance that it would be awarded under 2021 program rules. It is more likely that 2022 rules, or even 2023 rules would apply. With this in mind, a 2-year QAP would provide more certainty on eligibility.

The time flexibility allowed by a 2-year QAP would also provide opportunities for TDHCA staff to focus on other important initiatives that are important to the Department and stakeholders – or to focus on whether the rules are truly addressing the intended needs. It could also promote more thoughtful feedback of established rules and eliminate ‘surprise’ rules at least in the second year of an approved plan.

ON THE DOWN SIDE

A 2-year QAP would not allow us to address problematic portions of the rules from year to year. Competition for sites may become even fiercer since the same sites would score well for two consecutive years.

Unless applicants get some type of permission to allow for updates to things like price per square foot (and other areas sensitive to inflation pressure), there would be less flexibility to address these types of issues. A 2-year QAP could limit TDHCA’s ability to react to any federal changes and/or changes to funding, such as additional disaster credits, the inclusion of additional boost areas, or more recently, allowing for average income.

WHAT DO YOU SAY?

If you have your own thoughts and input on the pros and cons of a 2-Year QAP, we’d love to hear them. You can share your thoughts at https://www.taahp.org/2-Year-QAP.