50548 Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices 

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This notice is published under the 

authority of 46 U.S.C. 70004 and 5 

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Dated: September 2, 2021. 

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Rear Admiral, U.S. Coast Guard, Commander, 

First Coast Guard District. 

[FR Doc. 2021–19464 Filed 9–8–21; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6283–N–01] 

Statutorily Mandated Designation of 

Difficult Development Areas and 

Qualified Census Tracts for 2022 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, Housing and Urban 

Development (HUD). 

ACTION: Notice. 

SUMMARY: This document designates 

‘‘Difficult Development Areas’’ (DDAs) 

and ‘‘Qualified Census Tracts’’ (QCTs) 

for purposes of the Low-Income 

Housing Credit (LIHTC) under Internal 

Revenue Code (IRC) Section 42. The 

United States Department of Housing 

and Urban Development (HUD) makes 

new DDA and QCT designations 

annually. 

ADDRESSES: This notice and additional 

information about DDAs and QCTs 

including the lists of DDAs and QCTs 

are available electronically on the 

internet at https://www.huduser.gov/ 

portal/datasets/qct.html. 

FOR FURTHER INFORMATION CONTACT: For 

questions on how areas are designated 

and on geographic definitions, contact 

Michael K. Hollar, Senior Economist, 

Public Finance and Regulatory Analysis 

Division, Office of Policy Development 

and Research, Department of Housing 

and Urban Development, 451 Seventh 

Street SW, Room 8216, Washington, DC 

20410–6000; telephone number 202– 

402–5878, or send an email to 

Michael.K.Hollar@hud.gov. For specific 

legal questions pertaining to Section 42, 

Office of the Associate Chief Counsel, 

Passthroughs and Special Industries, 

Internal Revenue Service, 1111 

Constitution Avenue NW, Washington, 

DC 20224; telephone number 202–317– 

4137. For questions about the 

‘‘HUBZone’’ program, contact Bruce 

Purdy, Deputy Director, HUBZone 

Program, Office of Government 

Contracting and Business Development, 

U.S. Small Business Administration, 

409 Third Street SW, Suite 8800, 

Washington, DC 20416; telephone 

number 202–205–7554, or send an email 

to hubzone@sba.gov. (These are not tollfree telephone numbers.) Additional 

copies of this notice are available 

through HUD User at, toll-free, 800– 

245–2691 for a small fee to cover 

duplication and mailing costs. A tollfree text telephone is available for the 

telephone numbers above for persons 

with hearing or speech impairments at 

800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. This Notice 

Under IRC Section 42(d)(5)(B)(iii)(I), 

for purposes of the LIHTC, the Secretary 

of HUD must designate DDAs, which are 

areas with high construction, land, and 

utility costs relative to area median 

gross income (AMGI). This notice 

designates DDAs for each of the 50 

states, the District of Columbia, Puerto 

Rico, American Samoa, Guam, the 

Northern Mariana Islands, and the U.S. 

Virgin Islands. HUD makes the 

designations of DDAs in this notice 

based on modified Fiscal Year (FY) 2021 

Small Area Fair Market Rents (Small 

Area FMRs, SAFMRs), FY 2021 

nonmetropolitan county FMRs, FY 2021 

income limits, and 2010 Census 

population counts, as explained below. 

Similarly, under IRC Section 

42(d)(5)(B)(ii)(I), the Secretary of HUD 

must designate QCTs, which are areas 

where either 50 percent or more of the 

households have an income less than 60 

percent of the AMGI for such year or 

have a poverty rate of at least 25 

percent. This notice designates QCTs 

based on new income and poverty data 

released in the American Community 

Survey (ACS). Specifically, HUD relies 

on the most recent three sets of ACS 

data to ensure that anomalous estimates, 

due to sampling, do not affect the QCT 

status of tracts. 

II. Data Used To Designate DDAs 

HUD uses data from the 2010 Census 

on total population of metropolitan 

areas, metropolitan ZIP Code Tabulation 

Areas (ZCTAs), and nonmetropolitan 

areas in the designation of DDAs. The 

Office of Management and Budget 

(OMB) published updated metropolitan 

areas in OMB Bulletin No. 17–01 on 

August 15, 2017. FY 2021 FMRs and FY 

2021 income limits HUD uses to 

designate DDAs are based on these 

metropolitan statistical area (MSA) 

definitions, with modifications to 

account for substantial differences in 

rental housing markets (and, in some 

cases, median income levels) within 

MSAs. HUD calculates Small Area 

FMRs for the ZCTAs, or portions of 

ZCTAs within the metropolitan areas 

defined by OMB Bulletin No. 17–01. 

III. Data HUD Uses To Designate QCTs 

HUD uses data from the 2010 Census 

on total population of census tracts, 

metropolitan areas, and the 

nonmetropolitan parts of states in the 

designation of QCTs. The FY 2021 

income limits HUD uses to designate 

QCTs are based on these MSA 

definitions with modifications to 

account for substantial differences in 

rental housing markets (and in some 


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cases median income levels) within 

MSAs. In this QCT designation, HUD 

uses the OMB metropolitan area 

definitions published in OMB Bulletin 

No. 17–01, without modification for 

purposes of evaluating how many 

census tracts can be designated under 

the population cap but uses the HUDmodified definitions and their 

associated area median incomes for 

determining QCT eligibility. 

Because the 2010 Decennial Census 

did not include questions on respondent 

household income, HUD uses ACS data 

to designate QCTs. The ACS tabulates 

data collected over 5 years to provide 

estimates of socioeconomic variables for 

small areas containing fewer than 

65,000 persons, such as census tracts. 

Due to sample-related anomalies in 

estimates from year to year, HUD 

utilizes three sets of ACS tabulations to 

ensure that anomalous estimates do not 

affect QCT status. 

IV. Background 

The U.S. Department of the Treasury 

(Treasury) and the Internal Revenue 

Service (IRS) are authorized to interpret 

and enforce the provisions of IRC 

Section 42. In order to assist in 

understanding HUD’s mandated 

designation of DDAs and QCTs for use 

in administering IRC Section 42, a 

summary of the section is provided 

below. The following summary does not 

purport to bind Treasury or the IRS in 

any way, nor does it purport to bind 

HUD, since HUD has authority to 

interpret or administer the IRC only in 

instances where it receives explicit 

statutory delegation. 

V. Summary of the Low-Income 

Housing Credit 

A. Determining Eligibility 

The LIHTC is a tax incentive intended 

to increase the availability of lowincome rental housing. IRC Section 42 

provides an income tax credit to certain 

owners of newly constructed or 

substantially rehabilitated low-income 

rental housing projects. The dollar 

amount of the LIHTC available for 

allocation by each state (credit ceiling) 

is limited by population. Section 42 

allows each state a credit ceiling based 

on a statutory formula indicated at IRC 

Section 42(h)(3). States may carry 

forward unallocated credits derived 

from the credit ceiling for one year; 

however, to the extent such unallocated 

credits are not used by then, the credits 

go into a national pool to be allocated 

to qualified states as additional credit. 

State and local housing agencies 

allocate the state’s credit ceiling among 

low-income housing buildings whose 

owners have applied for the credit. 

Besides IRC Section 42 credits derived 

from the credit ceiling, states may also 

provide IRC Section 42 credits to 

owners of buildings based on the 

percentage of certain building costs 

financed by tax-exempt bond proceeds. 

Credits provided based on the use of 

tax-exempt bond proceeds do not 

reduce the credits available from the 

credit ceiling. See IRC Section 42(h)(4). 

The credits allocated to a building are 

based on the cost of units placed in 

service as low-income units under 

particular minimum occupancy and 

maximum rent criteria. Prior to the 

enactment of the Consolidated 

Appropriations Act, 2018 (the 2018 

Act), under IRC Section 42(g), a building 

was required to meet one of two tests to 

be eligible for the LIHTC; either: (1) 20 

percent of the units must be rentrestricted and occupied by tenants with 

incomes no higher than 50 percent of 

AMGI, or (2) 40 percent of the units 

must be rent-restricted and occupied by 

tenants with incomes no higher than 60 

percent of AMGI. A unit is ‘‘rentrestricted’’ if the gross rent, including an 

allowance for tenant-paid utilities, does 

not exceed 30 percent of the imputed 

income limitation (i.e., 50 percent or 60 

percent of AMGI) applicable to that 

unit. The rent and occupancy thresholds 

remain in effect for at least 15 years, and 

building owners are required to enter 

into agreements to maintain the lowincome character of the building for at 

least an additional 15 years. 

The 2018 Act added a third test, the 

average income test. See IRC Section 

42(g)(1), as amended by Public Law 

115–141, Division T, Section 103(a)(1) 

(March 23, 2018). A building meets the 

minimum requirements of the average 

income test if 40 percent or more (25 

percent or more in the case of a project 

located in a high cost housing area as 

described in IRC Section 142(d)(6)) of 

the residential units in such project are 

both rent-restricted and occupied by 

individuals whose income does not 

exceed the imputed income limitation 

designated by the taxpayer with respect 

to the respective unit. The taxpayer 

designates the imputed income 

limitation for each unit. The designated 

imputed income limitation of any unit 

is determined in 10-percentage-point 

increments, and may be designated as 

20, 30, 40, 50, 60, 70, or 80 percent of 

AMGI. The average of the imputed 

income limitations designated must not 

exceed 60 percent of AMGI. See IRC 

Section 42(g)(1)(C). 

B. Calculating the LIHTC 

The LIHTC reduces income tax 

liability dollar-for-dollar. It is taken 

annually for a term of 10 years and is 

intended to yield a present value of 

either: (1) 70 percent of the ‘‘qualified 

basis’’ for new construction or 

substantial rehabilitation expenditures 

that are not federally subsidized (as 

defined in IRC Section 42(i)(2)), or (2) 

30 percent of the qualified basis for the 

cost of acquiring certain existing 

buildings or projects that are federally 

subsidized. The tax credit rates are 

determined monthly under procedures 

specified in IRC Section 42 and cannot 

be less than 9 percent of the qualified 

basis of new buildings that are not 

federally subsidized, and not less than 

4 percent of the qualified basis of 

buildings that are federally subsidized. 

Individuals can use the credits up to a 

deduction equivalent of $25,000 (the 

actual maximum amount of credit that 

an individual can claim depends on the 

individual’s marginal tax rate). For 

buildings placed in service after 

December 31, 2007, individuals can use 

the credits against the alternative 

minimum tax. Corporations, other than 

S or personal service corporations, can 

use the credits against ordinary income 

tax, and, for buildings placed in service 

after December 31, 2007, against the 

alternative minimum tax. These 

corporations also can deduct losses from 

the project. 

The qualified basis represents the 

product of the building’s ‘‘applicable 

fraction’’ and its ‘‘eligible basis.’’ The 

applicable fraction is based on the 

number of low-income units in the 

building as a percentage of the total 

number of units, or based on the floor 

space of low-income units as a 

percentage of the total floor space of 

residential units in the building. The 

eligible basis is the adjusted basis 

attributable to acquisition, 

rehabilitation, or new construction costs 

(depending on the type of LIHTC 

involved). These costs include amounts 

chargeable to a capital account that are 

incurred prior to the end of the first 

taxable year in which the qualified lowincome building is placed in service or, 

at the election of the taxpayer, the end 

of the succeeding taxable year. In the 

case of buildings located in designated 

DDAs or designated QCTs, or for credits 

awarded from the state’s per capita 

allocation, buildings designated by the 

state agency, eligible basis may be 

increased up to 130 percent from what 

it would otherwise be. This means that 

the available credits also may be 

increased by up to 30 percent. For 

example, if a 70 percent credit is 

available, it effectively could be 

increased to as much as 91 percent (70 

percent × 130 percent). 


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1HUD encourages other jurisdictions with rent 

control laws that affect rents paid by recent movers 

into existing units to contact HUD about what data 

might be provided or collected to adjust Small Area 

FMRs in those jurisdictions. 

C. Defining Difficult Development Areas 

(DDAs) and Qualified Census Tracts 

(QCTs) 

As stated above, IRC Section 42 

defines a DDA as an area designated by 

the Secretary of HUD that has high 

construction, land, and utility costs 

relative to the AMGI. All designated 

DDAs in metropolitan areas (taken 

together) may not contain more than 20 

percent of the aggregate population of 

all metropolitan areas, and all 

designated areas not in metropolitan 

areas may not contain more than 20 

percent of the aggregate population of 

all nonmetropolitan areas. See IRC 

Section 42(d)(5)(B)(iii). 

Similarly, IRC Section 42 defines a 

QCT as an area designated by the 

Secretary of HUD where, for the most 

recent year for which census data are 

available on household income in such 

tract, either 50 percent or more of the 

households in the tract have an income 

which is less than 60 percent of the 

AMGI or the tract’s poverty rate is at 

least 25 percent. All designated QCTs in 

a single metropolitan area or 

nonmetropolitan area (taken together) 

may not contain more than 20 percent 

of the population of that metropolitan or 

nonmetropolitan area. Thus, unlike the 

restriction on DDA designations, QCTs 

are restricted by the total population of 

each individual area as opposed to the 

aggregate population across all 

metropolitan areas and nonmetropolitan 

areas. See IRC Section 42(d)(5)(B)(ii). 

IRC Section 42(d)(5)(B)(v) allows 

states to award an increase in basis up 

to 30 percent to buildings located 

outside of federally designated DDAs 

and QCTs if the increase is necessary to 

make the building financially feasible. 

This state discretion applies only to 

buildings allocated credits under the 

state housing credit ceiling and is not 

permitted for buildings receiving credits 

entirely in connection with tax-exempt 

bonds. Rules for such designations shall 

be set forth in the LIHTC-allocating 

agencies’ qualified allocation plans 

(QAPs). See IRC Section 42(m). 

VI. Explanation of HUD Designation 

Method 

A. 2022 Difficult Development Areas 

In developing the 2022 list of DDAs, 

as required by IRC Section 

42(d)(5)(B)(iii), HUD compared housing 

costs with incomes. HUD used 2010 

Census population for ZCTAs, and 

nonmetropolitan areas, and the MSA 

definitions, as published in OMB 

Bulletin 17–01 on August 15, 2017, with 

modifications, as described below. In 

keeping with past practice of basing the 

coming year’s DDA designations on data 

from the preceding year, the basis for 

these comparisons is the FY 2021 HUD 

income limits for very low-income 

households (very low-income limits, or 

VLILs), which are based on 50 percent 

of AMGI, and modified FMRs based on 

the FY 2021 FMRs used for the Housing 

Choice Voucher (HCV) program. For 

metropolitan DDAs, HUD used Small 

Area FMRs based on three annual 

releases of ACS data, to compensate for 

statistical anomalies which affect 

estimates for some ZCTAs. For nonmetropolitan DDAs, HUD used the FY 

2021 FMRs released on August 14, 2020 

and effective on October 1, 2020 (85 FR 

49666) as updated by the March 19, 

2020 publication effective April 1, 2021 

(86 FR 14953). 

In formulating the FY 2021 FMRs and 

VLILs, HUD modified the current OMB 

definitions of MSAs to account for 

differences in rents among areas within 

each current MSA that were in different 

FMR areas under definitions used in 

prior years. HUD formed these ‘‘HUD 

Metro FMR Areas’’ (HMFAs) in cases 

where one or more of the parts of newly 

defined MSAs were previously in 

separate FMR areas. All counties added 

to metropolitan areas are treated as 

HMFAs with rents and incomes based 

on their own county data, where 

available. HUD no longer requires 

recent-mover rents to differ by five 

percent or more in order to form a new 

HMFA. All HMFAs are contained 

entirely within MSAs. All 

nonmetropolitan counties are outside of 

MSAs and are not broken up by HUD for 

purposes of setting FMRs and VLILs. 

(Complete details on HUD’s process for 

determining FY 2021 FMR areas and 

FMRs are available at https://

www.huduser.gov/portal/datasets/ 

fmr.html#2021. Complete details on 

HUD’s process for determining FY 2021 

income limits are available at https://

www.huduser.gov/portal/datasets/ 

il.html#2021.) 

HUD’s unit of analysis for designating 

metropolitan DDAs consists of ZCTAs, 

whose Small Area FMRs are compared 

to metropolitan VLILs. For purposes of 

computing VLILs in metropolitan areas, 

HUD considers entire MSAs in cases 

where these were not broken up into 

HMFAs; and HMFAs within the MSAs 

that were broken up for such purposes. 

Hereafter in this notice, the unit of 

analysis for designating metropolitan 

DDAs will be called the ZCTA, and the 

unit of analysis for nonmetropolitan 

DDAs will be the nonmetropolitan 

county or county equivalent area. The 

procedure used in making the DDA 

designations follows: 

1. Calculate FMR-to-Income Ratios. 

For each metropolitan ZCTA and each 

nonmetropolitan county, HUD 

calculated a ratio of housing costs to 

income. HUD used a modified FY 2021 

two-bedroom Small Area FMR for 

ZCTAs, a modified FY 2021 twobedroom FMR for non-metropolitan 

counties, and the FY 2021 four-person 

VLIL for this calculation. 

The modified FY 2021 two-bedroom 

Small Area FMRs for ZCTAs differ from 

the FY 2021 Small Area FMRs in four 

ways. First, HUD did not limit the Small 

Area FMR to 150 percent of its 

metropolitan area FMR. Second, HUD 

did not limit annual decreases in Small 

Area FMRs to ten percent, which was 

first applied in the FY 2018 FMR 

calculations. Third, HUD adjusted the 

Small Area FMRs in New York City 

using the New York City Housing and 

Vacancy Survey, which is conducted by 

the U.S. Census Bureau, to adjust for the 

effect of local rent control and 

stabilization regulations. No other 

jurisdictions have provided HUD with 

data that could be used to adjust Small 

Area FMRs for rent control or 

stabilization regulations.1 Finally, the 

Small Area FMRs are not limited to the 

State non-metropolitan minimum FMR. 

The FY 2021 two-bedroom FMR for 

non-metropolitan counties was 

modified only by removing the state 

non-metropolitan minimum FMR. 

The numerator of the ratio, 

representing the development cost of 

housing, was the area’s FY 2021 FMR, 

or Small Area FMR in metropolitan 

areas. In general, the FMR is based on 

the 40th-percentile gross rent paid by 

recent movers to live in a two-bedroom 

rental unit. 

The denominator of the ratio, 

representing the maximum income of 

eligible tenants, was the monthly LIHTC 

income-based rent limit, which was 

calculated as 1⁄12 of 30 percent of 120 

percent of the area’s VLIL (where the 

VLIL was rounded to the nearest $50). 

2. Sort Areas by Ratio and Exclude 

Unsuitable Areas. The ratios of the 

FMR, or Small Area FMR, to the LIHTC 

income-based rent limit were arrayed in 

descending order, separately, for ZCTAs 

and for nonmetropolitan counties. 

ZCTAs with populations less than 100 

were excluded in order to avoid 

designating areas unsuitable for 

residential development, such as ZCTAs 

containing airports. 

3. Select Areas with Highest Ratios 

and Exclude QCTs. The DDAs are those 

areas with the highest ratios that 

cumulatively comprise 20 percent of the 


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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices 50551 

2010 population of all metropolitan 

areas and all nonmetropolitan areas. For 

purposes of applying this population 

cap, HUD excluded the population in 

areas designated as 2022 QCTs. Thus, an 

area can be designated as a QCT or 

DDA, but not both. 

B. Application of Population Caps to 

DDA Determinations 

In identifying DDAs, HUD applied 

caps, or limitations, as noted above. The 

cumulative population of metropolitan 

DDAs cannot exceed 20 percent of the 

cumulative population of all 

metropolitan areas, and the cumulative 

population of nonmetropolitan DDAs 

cannot exceed 20 percent of the 

cumulative population of all 

nonmetropolitan areas. 

In applying these caps, HUD 

established procedures to deal with how 

to treat small overruns of the caps. The 

remainder of this section explains those 

procedures. In general, HUD stops 

selecting areas when it is impossible to 

choose another area without exceeding 

the applicable cap. The only exceptions 

to this policy are when the next eligible 

excluded area contains either a large 

absolute population or a large 

percentage of the total population, or 

the next excluded area’s ranking ratio, 

as described above, was identical (to 

four decimal places) to the last area 

selected, and its inclusion resulted in 

only a minor overrun of the cap. Thus, 

for both the designated metropolitan 

and nonmetropolitan DDAs, there may 

be minimal overruns of the cap. HUD 

believes the designation of additional 

areas in the above examples of minimal 

overruns is consistent with the intent of 

the IRC. As long as the apparent excess 

is small due to measurement errors, 

some latitude is justifiable, because it is 

impossible to determine whether the 20 

percent cap has been exceeded. Despite 

the care and effort involved in a 

Decennial Census, the Census Bureau 

and all users of the data recognize that 

the population counts for a given area 

and for the entire country are not 

precise. Therefore, the extent of the 

measurement error is unknown. There 

can be errors in both the numerator and 

denominator of the ratio of populations 

used in applying a 20 percent cap. In 

circumstances where a strict application 

of a 20 percent cap results in an 

anomalous situation, recognition of the 

unavoidable imprecision in the census 

data justifies accepting small variances 

above the 20 percent limit. 

C. Qualified Census Tracts 

In developing the list of QCTs, HUD 

used 2010 Census 100-percent count 

data on total population, total 

households, and population in 

households; the median household 

income and poverty rate as estimated in 

the 2013–2017, 2014–2018 and 2015– 

2019 ACS tabulations; the FY 2021 Very 

Low-Income Limits (VLILs) computed at 

the HMFA level to determine tract 

eligibility; and the MSA definitions 

published in OMB Bulletin No. 17–01 

on August 15, 2017, for determining 

how many eligible tracts can be 

designated under the statutory 20 

percent population cap. 

HUD uses the HMFA-level AMGIs to 

determine QCT eligibility because the 

statute, specifically IRC Section 

42(d)(5)(B)(iv)(II), refers to the same 

section of the IRC that defines income 

for purposes of tenant eligibility and 

unit maximum rent, specifically IRC 

Section 42(g)(4). By rule, the IRS sets 

these income limits according to HUD’s 

VLILs, which, starting in FY 2006 and 

thereafter, are established at the HMFA 

level. HUD uses the entire MSA to 

determine how many eligible tracts can 

be designated under the 20 percent 

population cap as required by the 

statute (IRC Section 42(d)(5)(B)(ii)(III)), 

which states that MSAs should be 

treated as singular areas. 

HUD determined the QCTs as follows: 

1. Calculate 60 percent AMGI. To be 

eligible to be designated a QCT, a 

census tract must have 50 percent of its 

households with incomes below 60 

percent of AMGI or have a poverty rate 

of 25 percent or more. Due to potential 

statistical anomalies in the ACS 5-year 

estimates, one of these conditions must 

be met in at least 2 of the 3 ACS 5-year 

tabulations for a tract to be considered 

eligible for QCT designation. HUD 

calculates 60 percent of AMGI by 

multiplying by a factor of 1.2 the HMFA 

or nonmetropolitan county FY 2021 

VLIL adjusted for inflation to match the 

ACS estimates, which are adjusted to 

the value of the dollar in the last year 

of the 5-year group. 

2. Determine Whether Census Tracts 

Have Less than 50 percent of 

Households Below 60 percent AMGI. For 

each census tract, whether or not 50 

percent of households have incomes 

below the 60 percent income standard 

(income criterion) was determined by: 

(a) Calculating the average household 

size of the census tract, (b) adjusting the 

income standard to match the average 

household size, and (c) comparing the 

average-household-size-adjusted income 

standard to the median household 

income for the tract reported in each of 

the three years of ACS tabulations 

(2013–2017, 2014–2018 and 2015– 

2019). HUD did not consider estimates 

of median household income to be 

statistically reliable unless the margin of 

error was less than half of the estimate 

(or a Margin of Error Ratio, MoER, of 50 

percent or less). If at least two of the 

three estimates were not statistically 

reliable by this measure, HUD 

determined the tract to be ineligible 

under the income criterion due to lack 

of consistently reliable median income 

statistics across the three ACS 

tabulations. Since 50 percent of 

households in a tract have incomes 

above and below the tract median 

household income, if the tract median 

household income is less than the 

average-household-size-adjusted income 

standard for the tract, then more than 50 

percent of households have incomes 

below the standard. 

3. Estimate Poverty Rate. For each 

census tract, HUD determined the 

poverty rate in each of the three releases 

of ACS tabulations (2013–2017, 2014– 

2018 and 2015–2019) by dividing the 

population with incomes below the 

poverty line by the population for 

whom poverty status has been 

determined. As with the evaluation of 

tracts under the income criterion, HUD 

applies a data quality standard for 

evaluating ACS poverty rate data in 

designating the 2022 QCTs. HUD did 

not consider estimates of the poverty 

rate to be statistically reliable unless 

both the population for whom poverty 

status has been determined and the 

number of persons below poverty had 

MoERs of less than 50 percent of the 

respective estimates. If at least two of 

the three poverty rate estimates were not 

statistically reliable, HUD determined 

the tract to be ineligible under the 

poverty rate criterion due to lack of 

reliable poverty statistics across the ACS 

tabulations. 

4. Designate QCTs Where 20 percent 

or Less of Population Resides in Eligible 

Census Tracts. QCTs are those census 

tracts in which 50 percent or more of 

the households meet the income 

criterion in at least two of the three 

years evaluated, or 25 percent or more 

of the population is in poverty in at 

least two of the three years evaluated, 

such that the population of all census 

tracts that satisfy either one or both of 

these criteria does not exceed 20 percent 

of the total population of the respective 

area. 

5. Designate QCTs Where More than 

20 percent of Population Resides in 

Eligible Census Tracts. In areas where 

more than 20 percent of the population 

resides in eligible census tracts, census 

tracts are designated as QCTs in 

accordance with the following 

procedure: 

a. The statistically reliable income 

and poverty criteria are each averaged 

over the three ACS tabulations (2013– 


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2017, 2014–2018 and 2015–2019). 

Statistically reliable values that did not 

exceed the income and poverty rate 

thresholds were included in the average. 

b. Eligible tracts are placed in one of 

two groups based on the averaged 

values of the income and poverty 

criteria. The first group includes tracts 

that satisfy both the income and poverty 

criteria for QCTs for at least two of the 

three evaluation years; a different pair of 

years may be used to meet each 

criterion. The second group includes 

tracts that satisfy either the income 

criterion in at least two of the three 

years, or the poverty criterion in at least 

two of three years, but not both. A tract 

must qualify by at least one of the 

criteria in at least two of the three 

evaluation years to be eligible. 

c. HUD ranked tracts in the first group 

from highest to lowest by the average of 

the ratios of the tract averagehousehold-size-adjusted income limit to 

the median household income. Then, 

HUD ranked tracts in the first group 

from highest to lowest by the average of 

the poverty rates. HUD averaged the two 

ranks to yield a combined rank. HUD 

then sorted the tracts on the combined 

rank, with the census tract with the 

highest combined rank being placed at 

the top of the sorted list. In the event of 

a tie, HUD ranked more populous tracts 

above less populous ones. 

d. HUD ranked tracts in the second 

group from highest to lowest by the 

average of the ratios of the tract averagehousehold-size-adjusted income limit to 

the median household income. Then, 

HUD ranked tracts in the second group 

from highest to lowest by the average of 

the poverty rates. HUD then averaged 

the two ranks to yield a combined rank. 

HUD then sorted the tracts on the 

combined rank, with the census tract 

with the highest combined rank being 

placed at the top of the sorted list. In the 

event of a tie, HUD ranked more 

populous tracts above less populous 

ones. 

e. HUD stacked the ranked first group 

on top of the ranked second group to 

yield a single, concatenated, ranked list 

of eligible census tracts. 

f. Working down the single, 

concatenated, ranked list of eligible 

tracts, HUD identified census tracts as 

designated until the designation of an 

additional tract would cause the 20 

percent limit to be exceeded. If HUD 

does not designate a census tract 

because doing so would raise the 

percentage above 20 percent, HUD then 

considers subsequent eligible census 

tracts to determine if one or more 

eligible census tract(s) with smaller 

population(s) could be designated 

without exceeding the 20 percent limit. 

D. Exceptions to OMB Definitions of 

MSAs and Other Geographic Matters 

As stated in OMB Bulletin 17–01, 

defining metropolitan areas: 

‘‘OMB establishes and maintains the 

delineations of Metropolitan Statistical 

Areas, . . . solely for statistical 

purposes. . . . OMB does not take into 

account or attempt to anticipate any nonstatistical uses that may be made of the 

delineations[.] In cases where . . . an agency 

elects to use the Metropolitan . . . Area 

definitions in nonstatistical programs, it is 

the sponsoring agency’s responsibility to 

ensure that the delineations are appropriate 

for such use. An agency using the statistical 

delineations in a nonstatistical program may 

modify the delineations, but only for the 

purposes of that program. In such cases, any 

modifications should be clearly identified as 

delineations from the OMB statistical area 

delineations in order to avoid confusion.’’ 

Following OMB guidance, HUD’s 

estimation procedure for the FMRs and 

income limits incorporates the current 

OMB definitions of metropolitan CoreBased Statistical Areas (CBSAs) based 

on the CBSA standards, as implemented 

with 2010 Census data, but makes 

adjustments to the definitions, in order 

to separate subparts of these areas in 

cases where counties were added to an 

existing or newly defined metropolitan 

area. In CBSAs where HUD establishes 

subareas, it is HUD’s view that the 

geographic extent of the housing 

markets is not the same as the 

geographic extent of the CBSAs. 

In the New England states 

(Connecticut, Maine, Massachusetts, 

New Hampshire, Rhode Island, and 

Vermont), HUD defines HMFAs 

according to county subdivisions or 

minor civil divisions (MCDs), rather 

than county boundaries. However, since 

no part of an HMFA is outside an OMBdefined, county-based MSA, all New 

England nonmetropolitan counties are 

kept intact for purposes of designating 

Nonmetropolitan DDAs. 

VII. Future Designations 

HUD designates DDAs annually as 

updated HUD income limit and FMR 

data are made public. HUD designates 

QCTs annually as new income and 

poverty rate data are released. 

A. Effective Date 

The 2022 lists of QCTs and DDAs are 

effective: 

(1) For allocations of credit after 

December 31, 2021; or 

(2) for purposes of IRC Section 

42(h)(4), if the bonds are issued and the 

building is placed in service after 

December 31, 2021. 

If an area is not on a subsequent list 

of QCTs or DDAs, the 2022 lists are 

effective for the area if: 

(1) The allocation of credit to an 

applicant is made no later than the end 

of the 730-day period after the applicant 

submits a complete application to the 

LIHTC-allocating agency, and the 

submission is made before the effective 

date of the subsequent lists; or 

(2) for purposes of IRC Section 

42(h)(4), if: 

(a) The bonds are issued or the 

building is placed in service no later 

than the end of the 730-day period after 

the applicant submits a complete 

application to the bond-issuing agency, 

and 

(b) the submission is made before the 

effective date of the subsequent lists, 

provided that both the issuance of the 

bonds and the placement in service of 

the building occur after the application 

is submitted. 

An application is deemed to be 

submitted on the date it is filed if the 

application is determined to be 

complete by the credit-allocating or 

bond-issuing agency. A ‘‘complete 

application’’ means that no more than 

de minimis clarification of the 

application is required for the agency to 

make a decision about the allocation of 

tax credits or issuance of bonds 

requested in the application. 

In the case of a ‘‘multiphase project,’’ 

the DDA or QCT status of the site of the 

project that applies for all phases of the 

project is that which applied when the 

project received its first allocation of 

LIHTC. For purposes of IRC Section 

42(h)(4), the DDA or QCT status of the 

site of the project that applies for all 

phases of the project is that which 

applied when the first of the following 

occurred: (a) The building(s) in the first 

phase were placed in service, or (b) the 

bonds were issued. 

For purposes of this notice, a 

‘‘multiphase project’’ is defined as a set 

of buildings to be constructed or 

rehabilitated under the rules of the 

LIHTC and meeting the following 

criteria: 

(1) The multiphase composition of the 

project (i.e., total number of buildings 

and phases in project, with a 

description of how many buildings are 

to be built in each phase and when each 

phase is to be completed, and any other 

information required by the agency) is 

made known by the applicant in the 

first application of credit for any 

building in the project, and that 

applicant identifies the buildings in the 

project for which credit is (or will be) 

sought; 

(2) the aggregate amount of LIHTC 

applied for on behalf of, or that would 

eventually be allocated to, the buildings 

on the site exceeds the one-year 

limitation on credits per applicant, as 


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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices 50553 

defined in the QAP of the LIHTCallocating agency, or the annual percapita credit authority of the LIHTC 

allocating agency, and is the reason the 

applicant must request multiple 

allocations over 2 or more years; and 

(3) all applications for LIHTC for 

buildings on the site are made in 

immediately consecutive years. 

Members of the public are hereby 

reminded that the Secretary of Housing 

and Urban Development, or the 

Secretary’s designee, has legal authority 

to designate DDAs and QCTs, by 

publishing lists of geographic entities as 

defined by, in the case of DDAs, the 

Census Bureau, the several states and 

the governments of the insular areas of 

the United States and, in the case of 

QCTs, by the Census Bureau; and to 

establish the effective dates of such lists. 

The Secretary of the Treasury, through 

the IRS thereof, has sole legal authority 

to interpret, and to determine and 

enforce compliance with the IRC and 

associated regulations, including 

Federal Register notices published by 

HUD for purposes of designating DDAs 

and QCTs. Representations made by any 

other entity as to the content of HUD 

notices designating DDAs and QCTs that 

do not precisely match the language 

published by HUD should not be relied 

upon by taxpayers in determining what 

actions are necessary to comply with 

HUD notices. 

B. Interpretive Examples of Effective 

Date 

For the convenience of readers of this 

notice, interpretive examples are 

provided below to illustrate the 

consequences of the effective date in 

areas that gain or lose QCT or DDA 

status. The examples covering DDAs are 

equally applicable to QCT designations. 

(Case A) Project A is located in a 2022 

DDA that is NOT a designated DDA in 

2023 or 2024. A complete application 

for tax credits for Project A is filed with 

the allocating agency on November 15, 

2022. Credits are allocated to Project A 

on October 30, 2024. Project A is 

eligible for the increase in basis 

accorded a project in a 2022 DDA 

because the application was filed 

BEFORE January 1, 2023 (the assumed 

effective date for the 2023 DDA lists), 

and because tax credits were allocated 

no later than the end of the 730-day 

period after the filing of the complete 

application for an allocation of tax 

credits. 

(Case B) Project B is located in a 2022 

DDA that is NOT a designated DDA in 

2023 or 2024. A complete application 

for tax credits for Project B is filed with 

the allocating agency on December 1, 

2022. Credits are allocated to Project B 

on March 30, 2025. Project B is NOT 

eligible for the increase in basis 

accorded a project in a 2022 DDA 

because, although the application for an 

allocation of tax credits was filed 

BEFORE January 1, 2023 (the assumed 

effective date of the 2023 DDA lists), the 

tax credits were allocated later than the 

end of the 730-day period after the filing 

of the complete application. 

(Case C) Project C is located in a 2022 

DDA that was not a DDA in 2021. 

Project C was placed in service on 

November 15, 2021. A complete 

application for tax-exempt bond 

financing for Project C is filed with the 

bond-issuing agency on January 15, 

2022. The tax-exempt bonds that will 

support the permanent financing of 

Project C are issued on September 30, 

2022. Project C is NOT eligible for the 

increase in basis otherwise accorded a 

project in a 2022 DDA, because the 

project was placed in service BEFORE 

January 1, 2022. 

(Case D) Project D is located in an 

area that is a DDA in 2022 but is NOT 

a DDA in 2023 or 2024. A complete 

application for tax-exempt bond 

financing for Project D is filed with the 

bond-issuing agency on October 30, 

2022. Tax-exempt bonds are issued for 

Project D on April 30, 2024, but Project 

D is not placed in service until January 

30, 2025. Project D is eligible for the 

increase in basis available to projects 

located in 2022 DDAs because: (1) One 

of the two events necessary for 

triggering the effective date for buildings 

described in Section 42(h)(4)(B) of the 

IRC (the two events being tax-exempt 

bonds issued and buildings placed in 

service) took place on April 30, 2024, 

within the 730-day period after a 

complete application for tax-exempt 

bond financing was filed, (2) the 

application was filed during a time 

when the location of Project D was in a 

DDA, and (3) both the issuance of the 

tax-exempt bonds and placement in 

service of Project D occurred after the 

application was submitted. 

(Case E) Project E is a multiphase 

project located in a 2022 DDA that is 

NOT a designated DDA or QCT in 2023. 

The first phase of Project E received an 

allocation of credits in 2022, pursuant to 

an application filed March 15, 2022, 

which describes the multiphase 

composition of the project. An 

application for tax credits for the second 

phase of Project E is filed with the 

allocating agency by the same entity on 

March 15, 2023. The second phase of 

Project E is located on a contiguous site. 

Credits are allocated to the second 

phase of Project E on October 30, 2023. 

The aggregate amount of credits 

allocated to the two phases of Project E 

exceeds the amount of credits that may 

be allocated to an applicant in one year 

under the allocating agency’s QAP and 

is the reason that applications were 

made in multiple phases. The second 

phase of Project E is, therefore, eligible 

for the increase in basis accorded a 

project in a 2022 DDA, because it meets 

all of the conditions to be a part of a 

multiphase project. 

(Case F) Project F is a multiphase 

project located in a 2022 DDA that is 

NOT a designated DDA in 2023 or 2024. 

The first phase of Project F received an 

allocation of credits in 2022, pursuant to 

an application filed March 15, 2022, 

which does not describe the multiphase 

composition of the project. An 

application for tax credits for the second 

phase of Project F is filed with the 

allocating agency by the same entity on 

March 15, 2024. Credits are allocated to 

the second phase of Project F on 

October 30, 2024. The aggregate amount 

of credits allocated to the two phases of 

Project F exceeds the amount of credits 

that may be allocated to an applicant in 

one year under the allocating agency’s 

QAP. The second phase of Project F is, 

therefore, NOT eligible for the increase 

in basis accorded a project in a 2022 

DDA, since it does not meet all of the 

conditions for a multiphase project, as 

defined in this notice. The original 

application for credits for the first phase 

did not describe the multiphase 

composition of the project. Also, the 

application for credits for the second 

phase of Project F was not made in the 

year immediately following the first 

phase application year. 

Findings and Certifications 

Environmental Impact 

This notice involves the 

establishment of fiscal requirements or 

procedures that are related to rate and 

cost determinations and do not 

constitute a development decision 

affecting the physical condition of 

specific project areas or building sites. 

Accordingly, under 40 CFR 1508.4 of 

the regulations of the Council on 

Environmental Quality and 24 CFR 

50.19(c)(6) of HUD’s regulations, this 

notice is categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321). 

Federalism Impact 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any policy document that 

has federalism implications if the 

document either imposes substantial 

direct compliance costs on state and 

local governments and is not required 


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50554 Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices 

by statute, or the document preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the executive order. This 

notice merely designates DDAs and 

QCTs as required under IRC Section 42, 

as amended, for the use by political 

subdivisions of the states in allocating 

the LIHTC. This notice also details the 

technical methods used in making such 

designations. As a result, this notice is 

not subject to review under the order. 

Todd M. Richardson, 

General Deputy Assistant Secretary for Policy 

Development and Research. 

[FR Doc. 2021–19498 Filed 9–8–21; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6274–N–01] 

Annual Indexing of Basic Statutory 

Mortgage Limits for Multifamily 

Housing Programs; Annual Indexing of 

Substantial Rehabilitation Threshold 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, Housing and Urban 

Development (HUD). 

ACTION: Notice. 

SUMMARY: In accordance with Section 

206A of the National Housing Act, HUD 

is providing notice of adjustment to the 

Basic Statutory Mortgage Limits for 

Multifamily Housing Programs for 

Calendar Year 2021. HUD is also 

providing notice of adjustment to the 

per unit cost threshold for determining 

substantial rehabilitation in the 

Multifamily Housing Programs pursuant 

to its administrative guidance for 

Calendar Year 2021. 

DATES: Effective January 1, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Patricia M. Burke, Director, Office of 

Multifamily Production, Department of 

Housing and Urban Development, 451 

Seventh Street SW, Washington, DC 

20410–8000, telephone (202) 402–5693 

(this is not a toll-free number). Hearing 

or speech-impaired individuals may 

access this number through TTY by 

calling the toll-free Federal Information 

Relay Service at (800) 877–8339. 

SUPPLEMENTARY INFORMATION: Section 

206A of the National Housing Act (12 

U.S.C. 1712a) provides authority for the 

annual adjustment for the following 

FHA multifamily statutory dollar limits: 

I. Section 207(c)(3)(A) (12 U.S.C. 

1713(c)(3)(A)); 

II. Section 213(b)(2)(A) (12 U.S.C. 

1715e(b)(2)(A)); 

III. Section 220(d)(3)(B)(iii)(I) (12 U.S.C. 

1715k(d)(3)(B)(iii)(I)); 

IV. Section 221(d)(4)(ii)(I) (12 U.S.C. 

1715l(d)(4)(ii)(I)); 

V. Section 231(c)(2)(A) (12 U.S.C. 

1715v(c)(2)(A)); and 

VI. Section 234(e)(3)(A) (12 U.S.C. 

1715y(e)(3)(A)). 

Section 206A goes on to state that the 

preceding 

‘‘Dollar Amounts’’ shall be adjusted 

annually (commencing in 2004) on the 

effective date of the Federal Reserve Board’s 

adjustment of the $400 figure in the Home 

Ownership and Equity Protection Act of 1994 

(HOEPA). The adjustment of the Dollar 

Amounts shall be calculated using the 

percentage change in the Consumer Price 

Index for All Urban Consumers (CPI–U) as 

applied by the Federal Reserve Board for 

purposes of the above-described HOEPA 

adjustment. 

(b) Notification 

The Federal Reserve Board on a timely 

basis shall notify the Secretary, or his 

designee, in writing of the adjustment 

described in subsection (a) and of the 

effective date of such adjustment in order to 

permit the Secretary to undertake publication 

in the Federal Register of corresponding 

adjustments to the Dollar Amounts. The 

dollar amount of any adjustment shall be 

rounded to the next lower dollar. 

Note that 206A has not been updated 

to reflect the fact that HOEPA has been 

revised to use $1,000 as the basis for the 

adjustment rather than $400, and the 

Consumer Finance Protection Bureau 

has replaced the Federal Reserve Board 

in administering the adjustment. These 

changes were made by the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act’s amendments to the 

Truth in Lending Act, as further 

explained in the regulatory 

implementation of said changes found 

in 78 FR 6856, 6879 (Jan. 31, 2013). 

The percentage change in the CPI–U 

used for the HOEPA adjustment is a 0.3 

percent increase and the effective date 

of the HOEPA adjustment is January 1, 

2021. The Dollar Amounts under 

Section 206A have been adjusted 

correspondingly and have an effective 

date of January 1, 2021. 

These revised statutory limits may be 

applied to FHA multifamily mortgage 

insurance applications submitted or 

amended on or after January 1, 2021, so 

long as the loan has not been initially 

endorsed. 

The adjusted Dollar Amounts for 

Calendar Year 2021 are shown below. 

To implement the Consumer Finance 

Protection Bureau’s adjustment, a onetime proration is required to the 0.3 

percent figure, which was computed 

from April 2019 to April 2020 (see 85 

FR 50944, Aug. 19, 2020). Because 

HUD’s previous Dollar Amounts 

utilized CPI–U data through December 

2019, only interim CPI–U data from 

January 2020 through April 2020 is 

reflected in the table calculations. The 

overall impact of this adjustment 

resulted in no change for Calendar Year 

2021, because CPI–U showed minor 

inflation of 1 percent in January and 

February 2020, but was fully offset by 

minor deflation of 1% in March and 

April 2020, associated with COVID–19 

pandemic economic disruptions. 

Moving forward in future years HUD 

will continue to utilize the CFPB’s time 

period (April to April) used for the 

HOEPA CPI–U adjustment, which is 

typically published in the August 

preceding the following January 

effective date. 

Basic Statutory Mortgage Limits for 

Calendar Year 2021 Multifamily Loan 

Program 

Section 207—Multifamily Housing; 

Section 207 pursuant to Section 223(f)— 

Purchase or Refinance Housing; and, 

Section 220—Housing in Urban 

Renewal Areas 

Bedrooms Non-elevator Elevator 

0 ................ $54,892 $64,026 

1 ................ 60,807 70,944 

2 ................ 72,633 86,990 

3 ................ 89,525 108,951 

4+ .............. 101,352 123,193 

Section 213—Cooperatives 

Bedrooms Non-elevator Elevator 

0 ................ $59,488 $63,342 

1 ................ 68,592 71,764 

2 ................ 82,723 87,265 

3 ................ 105,887 112,895 

4+ .............. 117,966 123,927 

Section 234—Condominium Housing 

Bedrooms Non-elevator Elevator 

0 ................ $60,702 $63,881 

1 ................ 69,991 73,230 

2 ................ 84,411 89,049 

3 ................ 108,050 115,201 

4+ .............. 120,372 126,454 

Section 221(d)(4)—Moderate Income 

Housing 

Bedrooms Non-elevator Elevator 

0 ................ $54,628 $59,010 

1 ................ 62,013 67,649 

2 ................ 74,959 82,262 

3 ................ 94,085 106,418 

4+ .............. 106,314 116,817 

Section 231—Housing for the Elderly 


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