A. J. Johnson Partners with Mid-Atlantic AHMA for September Training on Affordable Housing
During the month of September 2022, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for three live webinar training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. The following sessions will be presented: September 13: Basic LIHTC Compliance (live webinar) - This training is designed primarily for site managers and investment asset managers responsible for site-related asset management and is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of credit related to on-site management, including the applicant interview process, the determination of resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions designed to ensure that students are fully comprehending the material. September 15: The Verification and Calculation of Income and Assets on Affordable Housing Properties (live webinar)- This five-hour live webinar (there will be a 1.5-hour lunch break) provides concentrated instruction on the required methodology for calculating and verifying income, and for determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, along with military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD-required techniques for the determination of income. The second component of the training focuses on a detailed discussion of requirements related to the determination of asset value and income and is applicable to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, HOME, and HOPE VI. Multiple types of assets are covered, both in terms of what constitutes an asset and how they are verified. This section also concludes with a series of problems, designed to test the student s understanding of the basic requirements relative to assets. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA that is designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.
A. J. Johnson to Host Live Webinar on End of Year LIHTC Compliance Requirements
A. J. Johnson will be conducting a webinar on September 8, 2022, on Ensuring Section 42 Compliance on December 31. The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. Experienced LIHTC managers and compliance professionals all know the importance of the last day of the tax year (normally December 31). This session will focus on all the issues to be aware of as the year draws to a close, with recommendations on how to ensure compliance at year-end and the ramifications of noncompliance. The discussion will center on the three primary compliance areas impacting the ability to claim credits - eligibility, affordability, and habitability. The training will stress the importance of year-round compliance relative to rent since excess rent at any point in the year can result in a credit loss. The session will close with a review of casualty loss issues and how these events may (or may not) impact the credits. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."
Freddie Mac Publishes Study of Risk of Affordable Housing Loss Due to Expiring LIHTC Extended Use
Freddie Mac (the Federal Home Loan Mortgage Corporation) has released a study titled "Risk and Impact of LIHTC Properties Exiting the Program: Examining the Risks of Expiring LIHTC Restrictions and the Outcomes of Properties that Exit." As market rents continue to rise, rental affordability is becoming increasingly important - especially in preserving existing affordable housing. Some in the industry are concerned that units supported by Low-Income Housing Tax Credits (LIHTC) may transition from having restricted, affordable rents to levels that are too expensive for low and even moderate-income households to afford. The goal of this Freddie Mac study is to provide an overview of the general risk that currently exists in the market and the potential for a high level of lost affordable units. A key finding from the research is that LIHTC properties that exit the program often remain more affordable than conventional market rate properties that were never subsidized, even if they are not resyndicated. Former LIHTC properties are often transitioning to workforce housing, remaining affordable to tenants that earn below the area median income (AMI). Here are some of the key findings outlined in the report: 86.8% of LIHTC properties are programmatic, meaning that they are still in the program and remain subject to rent restrictions. However, a growing number of properties will be able to exit the program in the coming years.High opportunity areas have a relatively high share of programmatic LIHTC properties, which, given the elevated rental costs, can be particularly beneficial for these areas.LIHTC properties that have left the program (referred to as non-programmatic) generally have higher rents compared with LIHTC-restricted units, but lower rents compared with conventional market-rate units.Some non-programmatic LIHTC properties increase rents substantially above 60% of the AMI affordable rents, but the majority are still affordable at this income level. The most common path for non-programmatic LIHTC properties is to remain affordable at 60% of AMI, which happens roughly 61% of the time. Explanation of Risk Housing researchers generally agree that the U.S. suffers from a lack of affordable housing. The National Low Income Housing Coalition (NLIHC) estimates that for every 100 renters earning 30% of AMI there are only 36 units available. The LIHTC program is the federal government s primary vehicle for providing affordable housing nationwide. The study found that based on the equity financing for LIHTC properties in 2021, most units (84.5%) are priced at 60% of AMI, with the remaining 15.5% targeting either 30%, 40%, or 50% of AMI. This validates what we in the industry have known anecdotally for years - most LIHTC properties operate under the 40/60 minimum set-aside. Identifying Types of Risk of Properties Exiting the LIHTC Program Between years 1-15 of the initial LIHTC compliance period, the risk of affordability loss is low since there is typically no legal way to raise rents above what is permitted at the time of LIHTC allocation. However, after year 15, several risks emerge that could lead to LIHTC properties leaving the program. The Qualified Contract (QC) Beginning as early as the end of year 14, LIHTC property owners typically may inform the applicable state Housing Finance Agency (HFA) of their intent to sell the property pursuant to the QC process.8 If a buyer is not found by the HFA within one year, the owner can convert the property to market rate rents after a three-year "decontrol" period. It should be noted that this option is very unpopular with the states and Congress is considering doing away with the option. Expiration of Affordability Restrictions Depending on the year a property is placed in service, affordability restrictions will generally lapse after 30 years. After this period, property owners can raise rents without the risk of credit recapture by the IRS or, in some cases, legal action by the HFA. Some states require a longer extended use period, and some property owners agree to more stringent restrictions in order to be more competitive in the allocation process. In this way, the 30-year rule is not universal. Foreclosure Historically, LIHTC properties have very low delinquency and default rates. However, a LIHTC property could still suffer from financial and operational problems that give a lender the right to foreclose. This can happen even before year 15. Upon foreclosure and transfer of ownership, the Land Use Restriction Agreement that includes rent restrictions typically will terminate, permitting the new owner to convert the property to market rent after a three-year decontrol period. The study notes that leaving the LIHTC program via foreclosure is very rare. If LIHTC properties leave the program, the degree of affordability loss can only truly be measured on a case-by-case basis since property owners will not necessarily raise rents, especially if property or local market conditions can t support the increase. Snapshot of Current Non-Programmatic LIHTC Properties The study identified 40,296 multifamily properties in the entire history of the LIHTC program. Of these, 34,975 are programmatic, which means they currently restrict rents based on local income in accordance with LIHTC requirements. The remaining 5,321 properties have exited the LIHTC program and are no longer believed to have LIHTC restricted rents. What Factors Increase or Decrease the Propensity of a Property to Exit the LIHTC Program? Ownership Type: LIHTC properties with nonprofit owners are less likely to leave the program.Year Placed-in-Service: Older LIHTC properties are substantially more likely to exit the program. Over 90% of properties placed in service prior to 1990 are believed to be non-programmatic. In 1990, the program length switched from 15 years to 30 years. However, beginning in 2020, the 30-year extended use period is expiring for a number of LIHTC properties, and this is a concern.Property Size: Smaller properties are more likely to have exited the program. The average property size of a non-programmatic property that was placed in service prior to 1990 is 43 units, compared with 73 units for programmatic properties. The trend changes for properties in service after 1990, where programmatic properties tend to be smaller than non-programmatic properties.Resyndication History: The rate for resyndicated programmatic properties is high 96.2% of properties that have resyndicated (i.e., obtained a new allocation of credits) remain programmatic.The State: Some states will mandate or incentivize extended use periods longer than the 15-year federal minimum. The study has identified 11 states for which this is true, with extended use periods ranging from 18 years to 99 years. These increased restrictions appear to decrease the rate of non-programmatic properties. Therefore, LIHTC properties in states with longer extended use periods will generally correlate with a lower risk of near-term exit. Following are the states the study identified with extended use periods longer than 15 years:Alabama - 20 yearsCalifornia - 40 yearsConnecticut - 25 yearsHawaii - 30 yearsKentucky - 18 yearsMaine - 30 years (was 75 years until 2013)New Hampshire- 45 years (was 84 years prior to 2020)Oregon - 45 yearsPennsylvania- 25 years (was 20 years prior to 2021)Utah - 35 years (was 84 years prior to 2013)Vermont - 84 yearsLocal Housing Market: There is the concern of an increased risk of losing LIHTC restricted properties that may be able to receive a premium due to local housing conditions. This is especially the case in highly sought-after neighborhoods. Interestingly, non-programmatic properties are in lower-income areas compared with programmatic properties. Given the elevated rental costs, high opportunity areas especially benefit from affordable housing, so it s encouraging that an outsized portion of LIHTC units are still in the program.Rent Level - Market vs. Max LIHTC: As market rate rents increased, fewer conventional market rate properties remain affordable at 60% of AMI and below, creating a gap between maximum restricted LIHTC rents and conventional rents. If market rent is substantially higher than maximum LIHTC rent, this could entice property owners to reposition a LIHTC property as market rate either at the expiration of affordability restrictions or before expiration via a QC. What Happens to LIHTC Properties that Become Market Rate? Once a LIHTC property exits the program, rents at the property are no longer subject to restrictions, provided the property does not receive other subsidies and is not subject to other restrictive covenants. The Study uses seven metro areas to determine the answer to what is happening to exiting LIHTC properties. These are Dallas, Indianapolis, Los Angeles, Orlando, Phoenix, Seattle, and Washington, D.C. These locations were chosen because they are geographically and culturally diverse and had relatively large non-programmatic populations. Non-programmatic properties with fewer than 50 units were not considered. Here are the major findings: Non-programmatic LIHTC properties are considerably older than other market-rate properties.Non-programmatic LIHTC properties generally have lower property ratings and lower location ratings compared with conventional market rate properties.Rents in non-programmatic LIHTC properties tend to be lower than market-rate units that were never in the LIHTC program. This is true for all seven metro areas studied. The largest rent gap was in Dallas, where non-programmatic LIHTC rents are 26.5% lower than market rate, while the smallest gap was in Phoenix, where non-programmatic rents are only 3.0% lower.The analysis shows that non-programmatic LIHTC rents are still materially below the rest of the market.In general, many non-programmatic LIHTC properties continue to provide affordable housing. Rent levels across these metro areas for non-programmatic properties are affordable, on average, to tenants making 61% of AMI. Opportunity for Workforce Housing Non-programmatic LIHTC represents a loss of the strictly affordable stock, which is the segment of the market with the most need, but it benefits another market segment: workforce housing. Workforce housing typically serves renters who make below the median income for the area but are not eligible for subsidies. Overall, programmatic LIHTC units are generally the most affordable and guarantee they will remain affordable, followed by non-programmatic LIHTC. Loss of Deeply Affordable Units The loss of affordable LIHTC units can still be very problematic. This is especially true for deeply affordable units at 30% AMI. There are no units in the non-programmatic dataset that are affordable at 30% AMI, while only 0.1% of conventional market-rate units are affordable at this level. Since market rents can almost never support rents at this level, the conversion of a LIHTC property to market rate typically means the loss of deeply affordable units at 30% AMI. Conclusion of the Study Rent and income restrictions for LIHTC properties generally persist for at least 30 years, but as the program ages and more properties near the end of their compliance periods, the risk of affordability loss increases. Certain factors are correlated with the risk of ending LIHTC rent restrictions such as ownership type, property characteristics, and local housing market. The decision to convert properties to market rate, however, ultimately lies with the property owner who is motivated by a variety of factors. Fortunately, the propensity for LIHTC properties to move to a rent level on par with market rate is low. Although rent for units among non-programmatic LIHTC properties is typically higher than programmatic LIHTC rents, they are still materially below conventional market-rate rent levels. In this way, LIHTC properties leaving the program play a role in a community s overall rental housing strategy by adding to the workforce housing stock, thus increasing affordable access to households that may not qualify for subsidized housing. However, several risks remain, particularly around the loss of deeply affordable units and the risk of rents increasing due to market conditions or rehabilitation of the property. Available public subsidies can best benefit those properties that provide deeply affordable housing as well as affordable housing in areas without a lot of access to similar-priced housing. Understanding the risks associated with the loss of affordable units from LIHTC properties can help inform what may happen as more properties exit the program and provide strategies to help preserve affordable housing to help those tenants most at risk of losing affordable housing.
Cooler Surfaces Create a Competitive Advantage
Multifamily housing developers - including those who build affordable housing - can reduce peak temperatures by replacing hot, dark surfaces - interior roads, rooftops, playgrounds, and parking lots - with cooler alternatives. With each summer seemingly getting hotter than the one before, apartment owners who can develop and market cooler properties will have an advantage over those who do not. While there has been some movement toward "cool roof" and "cool pavement" programs, truly meaningful results will only come from plans that involve all heat-trapping surfaces. Any surface that is dark and impervious should be replaced with surfaces that are green, porous, and reflective. The Smart Surfaces Coalition has partnered with the City of Baltimore as a demonstration of what can be done to cool the urban environment. The idea is to cover the city with reflective roofs and highways, solar panels, trees, porous pavements, and "urban meadows" - areas of the median where mown grass is replaced with unmanicured native grasses. These same ideas can be applied in a micro way at individual properties. "Cool roofs" are an immediate solution for properties undergoing renovation if roof replacement is part of the renovation plan. These building materials help mitigate the urban heat island effect, which can have important implications regarding the comfort of residents. In the past ten years, there has been a significant increase in the cool roof and urban heat island policies in U. S. cities. As of the start of the pandemic (March 2020), Austin, Chicago, Chula Vista (CA), Dallas, Denver, Houston, Los Angeles, Miami Beach, New York, Philadelphia, and Washington, DC had all implemented cool roof mandates. Many cities encourage cool roofs through voluntary green building programs, income-qualified programs, and financial incentives. Anaheim, CA, Austin, Chicago, Los Angeles, Louisville, Pasadena, and Orlando offer a cool roof rebate, while Baltimore, New York City, Philadelphia, and San Antonio use programs that install cool roofs on low-income homes. Affordable housing developers in these cities should investigate how they may use these local benefits. The adoption of cool roofs is also present at the state level. California has had a prescriptive cool roof requirement in its building code (Building Energy Efficiency Standards, Title 24, Part 6) since 2005. Alabama, Florida, Georgia, Hawaii, Nebraska, and Texas also have building codes with cool roof requirements. It is likely that as more states update their building codes, cool roof and other energy-efficient measures will be included. How Do Cool Coatings Work? During the day, a cool roof reflects solar radiation away from the building, and, at night, releases any heat that was absorbed by the roof. In addition to resisting urban warming, a cool roof also lowers the demand for air conditioning, decreases peak electrical demand, and increases resident comfort. When used collectively, cool roofs also improve outdoor air quality and assist with stabilizing electrical grids. Cool roof materials also complement green and solar roofs. Cool roofs are available in a variety of product types, including field-applied coatings and factory-coated metal. Historically, flat or low-sloped roofs have been transformed into cool roofs by coating them white. However, there are now "cool color" products on the market that use darker colored pigments that are highly reflective in the near-infrared (non-visible) portion of the solar spectrum. The "coolness" of a roof coating is determined by two basic properties: solar reflectance (sometimes called albedo) and thermal emittance. Solar reflectance is the fraction of solar radiation that is reflected away from the roof, while thermal emittance is the efficiency by which the roof can radiate any heat that was absorbed into the building. The values of both properties range from 0 - 1. In addition to these two metrics, the "coolness" of a roof can also be represented by its solar reflective index (SRI) value, a calculated metric that combines solar reflectance and thermal emittance into one value. SRI values are usually between 0 and 100, with very cool materials exceeding 100. It is this metric that is most easily understood by builders and developers. With numerous products available for installation on commercial and residential buildings, identifying roofing materials that meet the needs of a project can be difficult. The Cool Roof Rating Council (CRRC) has published a Rated Products Directory, which is an excellent resource for developers looking to receive LEED credits, comply with building codes, or qualify for rebates or loans. The CRRC also is looking at rating exterior wall products. Recent research by Lawrence Berkeley National Laboratory found that cool walls can save as much energy as a cool roof, and when combined, savings are multiplied. What About Cool Pavement? While not as thoroughly studied as cool roofs, cool pavement research is well underway. The City of Phoenix Street Transportation Department and Office of Sustainability have announced the results of the first year of its Cool Pavement Pilot Program. The program and analysis of the cool pavement process is being conducted in partnership with Arizona State University (ASU). Year one of the study done by scientists at ASU s Global Institute of Sustainability and Innovation, Healthy Urban Environments, and the Urban Climate Research Center shows that reflective pavement surface temperatures are considerably lower than traditional roadway pavement. Cool pavement coating reflects a higher portion of the sunlight that hits it, hence absorbing less heat. Because of this higher reflectivity, the coating has the potential to offset rising nighttime temperatures in the hottest regions of the country. Findings from the first year of the study include: Cool pavement revealed lower surface temperatures at all times of the day versus traditional asphalt.Cool pavement had an average surface temperature of 10.5 to 12 degrees Fahrenheit lower than traditional asphalt at noon and during the afternoon hours. Surface temperatures at sunrise averaged 2.4 degrees Fahrenheit lower.Sub-surface temperatures averaged 4.8 degrees lower in areas treated with cool pavement, which indicates a longer lifespan for the surface.Nighttime air temperature at six feet of height was on average 0.5 degrees lower over cool pavement than on non-treated surfaces. While the expense of the cool pavement technology may not be practical for any but the largest housing developments, cool roof technology offers immediate benefit for virtually any multifamily housing development. Builders and owners who are in a position to do so should strongly consider the use of cool roofs for their next new or renovated development.
HUD Issues Guidance on Solar Credits Impact on Resident Income and Project Utility Allowances
A growing number of states offer community solar programs. These programs give families who live in properties, including HUD-subsidized properties and private market rental units, access to renewable energy, even though the property itself may not be suitable for solar panels. Community solar arrays have multiple subscribers who receive benefits on utility bills that are directly attributable to the solar project s energy generation. There are no upfront costs to subscribers, and they can receive benefits typically in the form of an on-electricity bill credit. When there are ongoing costs or fees for low-income participants, it is typically mandated that any costs will not be more than 50% of the value participants get from their system. HUD has issued a Notice on "Treatment of Community Solar Credits on Tenant Utility Bills." The purpose of this notice is to provide guidance to HUD Multifamily Housing (MFH) field staff, owners, and management agents on the treatment of on-bill virtual net energy metering credits that commonly result from a resident s participation in a community solar program. The guidance only applies in cases where tenants are paying for electricity and does not apply to master-metered buildings. This notice applies to the following Office of Multifamily Housing Programs: 1. Project-based Section 8 2. Section 202/162 Project Assistance Contracts (PAC) 3. Section 202 Project Rental Assistance Contracts (PRAC) 4. Section 202 Senior Preservation Rental Assistance Contracts (SPRAC) 5. Section 811 PRACs 6. Section 811 Project Rental Assistance (PRA) 7. Section 236 Subsidized Mortgages The notice outlines a two-step process to be followed in determining (1) will the credit impact the project utility allowance; and (2) does the credit count as annual income for residents. Step One: Determine if community solar credits affect the utility allowance calculation. If the credit reduces the cost of energy consumption by lowering actual utility rates, then the owner is required to submit a new baseline analysis in accordance with Housing Notice 2015-04, regardless of when the last analysis was submitted to HUD/Contract Administrator for approval.Also, if the credit amount fluctuates from month to month, then the credit is tied to the cost of utility consumption, and a new baseline analysis is required.If the credit is a third-party payment (e.g., not from the utility provider) on behalf of the tenant and not a reduction in the cost of utilities, the owner is not required to submit a new utility allowance baseline analysis. Step Two: Determine if the solar credits should be considered annual income for rent calculation or eligibility determination. If the solar credit is tied to the cost of consumption (i.e., the utility allowance is affected), then the credit will not count toward income.If a community solar benefit appears on a household s electricity bill as an amount credited from the total cost of the bill, HUD has determined that the credit should be treated as a discount or coupon to achieve a lower energy bill (rather than a cash payment or cash-equivalent payment being made available to a resident).In this case, the credit will not be counted towards income as discounts on items purchased by a tenant are not viewed as "annual income" to the family.Generally, income is not generated when a family purchases something at a cheaper rate than it otherwise would.Note that if the credits are found to be third-party payments based on Step One, there may be instances when the credits are not mere discounts and must be treated as income.For instance, a recurring monthly utility payment made on behalf of the family by an individual outside of the household is not considered a discount but is considered annual income to the family. If you are evaluating the treatment of solar credits outside the program framework outlined above and require a state-specific determination and/or have general questions about this guidance, please email Lauren Ross, Senior Advisor for Housing and Sustainability at Lauren.Ross@hud.gov.
A. J. Johnson to Offer Live Webinar on File Management & Documentation for Affordable Housing
A. J. Johnson will be conducting a webinar on July 27, 2022, on File Management & Documentation for Affordable Housing Properties. The Webinar will be held from 1:00 PM to 3:30 PM Eastern time. This 2.5-hour course covers the important, but often overlooked role that file management and documentation play in the success of affordable housing properties. A detailed discussion of how to organize a file, the documents required for each file, setting up the "property notebook," and acceptable forms of verification for all issues relating to eligibility are covered. The course is applicable to all affordable housing programs, including Section 8 and LIHTC, It includes a basic review of resident eligibility issues, with particular emphasis on the documentation of income. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."
Updated Registration Information for A. J. Johnson/Colorado Housing VAWA/LIHTC Webinar
A.J. Johnson will be presenting the Violence Against Women Act - Guidance for LIHTC Properties on August 4, 2022, at 11:00 am (EST). This class will be offered through Colorado Housing and Finance Authority s chfareach educational programming for affordable housing property owners and managers. An updated link for course registration is included below. The Violence Against Women (VAWA) Reauthorization Act of 2013 expanded VAWA protections to many different affordable housing programs - including the Low-Income Housing Tax Credit (LIHTC) Program. While HUD has provided detailed requirements on VAWA implementation at HUD properties, there has been no uniform guidance for LIHTC owners and managers. A proposal before Congress would legislate that LIHTC Extended Use Agreements contain VAWA requirements. The IRS has not provided guidance and while many state agencies are requiring VAWA plans, they are not providing information on what the plans should look like. This two-hour training - when combined with the course materials- will review VAWA requirements and recommend best practices for developing VAWA plans at LIHTC and other non-HUD properties. The session will be presented by A. J. Johnson, a recognized expert in the affordable housing field and the author of "A Property Manager s Guide to the Violence Against Women Act." The link to register for the session is https://www.chfainfo.com/rental-housing/chfareach/all-events#id=11333&cid=986&wid=501
Novogradac Releases Study on 2023 Income Estimates
Novogradac and Company, a nationally recognized accounting firm in the area of affordable housing, has released a study on potential changes in income limits for 2023. Novogradac completed the estimates using five-year American Community Survey (ACS) data. When the Department of Housing and Urban Development updates the income limits for various housing programs each year, the agency relies on a combination of one-year ACS data. However, the Census Bureau will not be releasing a one-year ACS for 2020, so HUD will most likely rely on the five-year ACS data. Previous research by Novogradac has indicated that 2023 income limits calculated by HUD using the five-year data will be 3.5% lower than they would be under the one-year data. The estimates for 2023 based on the 2020 five-year ACS show much lower income growth than 2022. However, the Novogradac study shows that income limits will still trend up, even though the rate will be slower than in previous years. In other words, a national decline in income limits is unlikely. One of the major reasons for the expected increase in income is inflation which is currently running at levels unseen in 40 years. Because HUD uses the historical ACS when determining income limits, it uses a consumer price index (CPI) trend factor to project income limits from the historical ACS year to the income limit year. Inflation is expected to continue for the rest of 2022 and well into 2023. The most recent Congressional Budget Office (CBO) estimates show that the CPI will continue to rise rapidly in the upcoming year. Without taking into consideration any other factors, inflation alone will lead to about a 2.34% increase in income limits. When determining very low-income limits (VLI), which are used by LIHTC, tax-exempt bond developments, and many HUD programs, HUD has certain adjustments that impact income limits. One of the adjustments is the cap on how much change there can be for income limits from one year to the next. The increase is capped at the greater of 5%, or two times the change in national median income. In 2022, HUD revised its cap methodology somewhat, resulting in more than 50% of areas having incomes that were capped. This cap will lessen the impact of any decline in income limits for certain areas. Using CBO estimates of 2023 inflation, Novogradac was able to estimate income for more than 2,600 counties. They cannot estimate income limits for areas that are impacted by adjustments made by HUD for high housing costs or the state non-metro adjustment. The estimated change in national median income will be approximately 1%, meaning the cap on increases for 2023 will be 5%. However, the average change in income limits will be 3.11%, which is a major decrease from 2022, when the average was 10.5%. Despite this decrease, the 2023 increase is much higher than was anticipated, thanks mainly to inflation. The good news for LIHTC developers is that less than 6% of all areas are estimated to have a decrease and only 1.4% of areas are estimated to have a decrease of more than 2%. On the other hand, 44% of areas are expected to have increases of more than 4% and 25% of areas will max out at the 5% cap. Those wishing to examine the Novogradac study in more detail should go to the Novogradac website - www.novoco.com.