LIHTC Qualified Allocation Plans

State housing finance agencies publish a Qualified Allocation Plan (QAP) every year to decide which affordable housing projects receive Low-Income Housing Tax Credits. The QAP sets the scoring rules, funding priorities, and compliance requirements that determine whether an application gets funded.

Shamrock Development has worked inside these plans across more than 20 states over 27 years, advising developers, syndicators, and housing authorities on how to structure deals that score well under a specific state’s QAP. This guide breaks down what a QAP is, how it works, and what it means for your next application.

What Is a Qualified Allocation Plan?

A Qualified Allocation Plan is the document a state housing finance agency publishes each year to score competitive applications for Low-Income Housing Tax Credits and set the compliance rules those developments must follow afterward. Every state, plus the District of Columbia and four U.S. territories, is required to adopt one before allocating credits.

The QAP functions as the operating rulebook for that state’s LIHTC program. It converts a fixed federal tax benefit into a state-run competition, with its own scoring priorities and funding categories layered on top of the federal baseline.

What Does Federal Law Require in a QAP?

Internal Revenue Code Section 42(m)(1)(B) requires three things in every QAP:

• 10 selection criteria for scoring applications
• A stated preference for certain types of applications
• A procedure for monitoring compliance after allocation

Treasury Regulation Section 1.42-17 covers QAPs on paper, but its selection-criteria section is marked “reserved” and adds no further federal detail. States write the rest.

Do 4% Bond-Financed LIHTC Deals Have to Follow the QAP Too?

Yes, Internal Revenue Code Section 42(m)(1)(D) requires properties claiming the 4% credit associated with tax-exempt bonds to comply with the same QAP requirements as competitive 9% applications. A bond-financed deal skips the competitive scoring process for credits, but it does not skip the QAP itself.

Which Agencies Administer QAPs?

A designated state housing finance agency administers the QAP in each U.S. state, and that structure extends well beyond the 50 states themselves. Altogether, a sponsor working nationally has more than 50 separate allocating bodies to track, each running its own version of the qualified allocation plan LIHTC applicants have to satisfy.

Which Jurisdictions Have Their Own Allocating Agency?

Beyond the 50 states, the District of Columbia and four U.S. territories, Puerto Rico, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands, each maintain their own allocating agency. Chicago and New York City also allocate credits independently of their state agencies, and a small number of Minnesota localities suballocate under a state-authorized structure.

When Isn’t the Governing Document Actually Called a “QAP”?

Some agencies place their operative scoring and eligibility rules in application manuals, program guides, or instruction packets rather than in a document titled “Qualified Allocation Plan.” The rules carry the same legal weight either way. Sponsors researching a state’s requirements need to confirm which document is actually controlling, since the QAP itself may not be the only place the real rules live.

What Are the Core Parts of a State QAP?

Every QAP is organized around four core parts: set-asides, threshold requirements, selection criteria, and compliance monitoring. Set-asides and threshold requirements filter and reserve credits before scoring begins, selection criteria rank the applications that remain, and compliance monitoring governs the property for decades after the credits are awarded.

These four parts appear in some form in every state’s LIHTC Qualified Allocation Plan, even though the specific point values and priorities differ from state to state.

What Are Set-Asides?

A set-aside reserves a fixed portion of a state’s annual credit pool for a specific project type before general scoring begins. Common set-aside categories include nonprofit-sponsored developments, rural properties, supportive housing for people experiencing homelessness, and preservation of existing affordable units nearing the end of their compliance period.

A project that qualifies for a set-aside competes only against other applications inside that same reserved pool, not against the full statewide applicant field.

What Are Threshold Requirements?

A threshold requirement is a minimum standard an application must meet before a state will score it at all. Typical thresholds include confirmed site control, local zoning approval, a completed market study, and evidence of financial feasibility for the full compliance period.

An application that fails even one threshold is disqualified before scoring starts, regardless of how strong the rest of the deal looks on paper.

What Are Selection Criteria (Scoring)?

Selection criteria are the point system a state uses to rank threshold-eligible applications against one another. States typically score across categories such as site quality, cost reasonableness, developer experience, tenant population served, and the strength of the project’s financing structure.

The highest-scoring applications receive credits first, and the process continues until that year’s credit pool is exhausted.

What Are Compliance Monitoring Requirements?

Compliance monitoring is the process a state agency uses to confirm a property maintains its income and rent restrictions for the full length of its compliance period, which runs 30 years or longer. Agencies typically conduct periodic file reviews, physical inspections, and tenant file audits throughout that period.

A property found out of compliance can face credit recapture, which makes long-term asset management a direct extension of the QAP commitments made at application.

How Does QAP Scoring Shape Underwriting and Deal Structuring?

A project’s underwriting and its QAP score are not separate conversations. Every assumption in the capital stack, from site cost to developer fee, gets measured against that state’s specific scoring criteria. A deal can look strong financially while still scoring weak competitively, because it was underwritten against general market feasibility rather than the QAP it will actually be scored under.

How Do Cost Policies Affect Competitiveness?

Cost policies set the ceiling on what a state considers a reasonable project cost, and going over that ceiling can cost an application points or knock it out of contention entirely. States typically cap costs by geography, limit fees as a share of total development cost, and score applications against a benchmark cost per unit for that project type.

Sponsors who skip this check sometimes find out their numbers were fine everywhere except the one place that actually mattered.

How Should Site Selection Align With a State’s Preferences?

Site selection works best when it’s matched to a state’s current scoring priorities, not chosen first and justified later. A location that scores points in one state, such as a Qualified Census Tract or a site near transit, might carry no weight at all under a neighboring state’s plan.

That’s the practical reason site control decisions should follow a close read of the current QAP, rather than assumptions carried over from a different state’s program.

How Do State QAPs Differ From One Another?

Two states can be working from the same federal statute and still produce completely different QAPs. The National Council of State Housing Agencies recommends agencies review their plans every year, and states like North Carolina do exactly that, publishing a new QAP annually and holding a public forum before finalizing it.

That annual review is exactly why a scoring priority that mattered last year, or in a different state, can’t be assumed to matter this year, in this state.

Why Do Multi-State Sponsors Need a Different Strategy Than Single-State Developers?

A developer working in one state for years builds up a feel for that agency’s priorities without ever having to write it down. A sponsor working in ten states doesn’t get that luxury. Each QAP has to be read on its own terms, every cycle, because the scoring priorities that worked in one state can just as easily work against a project in the next.

That’s the gap Shamrock Development is built to close, reading each state’s current QAP before a client commits capital to a site, not after.

What National Standards Guide QAP Administration?

Two sources guide QAP administration beyond the statute itself: recommended practices published by the National Council of State Housing Agencies, and a small number of IRS notices and rulings issued over the past decade. Neither carries the force of federal law, but both shape how agencies actually write and apply their QAPs.

What Are NCSHA’s Recommended Practices for QAPs?

NCSHA’s Recommended Practices in Housing Credit Administration are a set of non-binding guidelines that most state agencies align their QAPs with wherever possible. NCSHA revised the practices in 2023, superseding the 2017 edition that’s still the version most commonly cited elsewhere, and QAP administration remains one of the core recommendations covered.

Because the practices represent near-consensus among allocating agencies, a QAP provision that conflicts with a current NCSHA recommendation is worth flagging during underwriting, since it may signal an outdated policy the agency hasn’t yet revised.

What Federal Guidance Exists Beyond the Statute Itself?

Federal guidance beyond Internal Revenue Code Section 42 itself is limited to two IRS documents issued in late 2016: Notice 2016-77 and Revenue Ruling 2016-29. Notice 2016-77, issued December 27, 2016, clarified that a QAP’s required preference for Qualified Census Tract projects only applies when the project contributes to an actual concerted community revitalization plan, not when the project itself is treated as that plan. Revenue Ruling 2016-29 clarified that Section 42 does not require or encourage agencies to reject applications that lack local government approval.

Treasury Regulation Section 1.42-17 technically covers QAPs as well, but its selection-criteria section remains marked “reserved,” leaving these two 2016 documents as the primary federal interpretation issued in the past decade.

What Is Qualified Basis in LIHTC?

Qualified basis is the dollar amount used to calculate how large a property’s Low-Income Housing Tax Credit allocation is. It’s calculated by multiplying a building’s eligible basis, its depreciable construction cost, by the applicable fraction, which is the smaller of the percentage of units or the percentage of floor space set aside for low-income tenants.

Qualified basis is a cost calculation, not a scoring rule. The QAP determines whether a project wins an allocation; qualified basis determines how large that allocation is once it’s won.

What Is Qualified Occupancy in LIHTC?

Qualified occupancy means a property is meeting the minimum set-aside test it committed to at application and keeping its restricted units filled with tenants at or below the required income limit. Properties typically commit to one of three tests: 20% of units at 50% of area median income, 40% of units at 60% of area median income, or an average income test blending multiple income tiers.

A property that falls out of qualified occupancy during its compliance period risks credit recapture, which is why occupancy tracking is a core function of long-term LIHTC asset management, not a one-time check at lease-up.

How Often Is a QAP Updated?

Most state QAPs are updated annually, for two reinforcing reasons:

• States receive a new LIHTC allocation every year and need a current plan to award it under
• NCSHA’s Recommended Practices call for agencies to review priorities annually and provide a public comment period before finalizing changes

North Carolina illustrates the pattern directly: its housing finance agency proposes a new QAP each year and holds a public forum before adoption, giving developers and advocacy groups a recurring opportunity to respond to scoring changes before they take effect.

Why Multi-State QAP Navigation Matters for Institutional Sponsors

The real cost of a QAP mismatch shows up long before the rejection letter. It’s already sitting in site control deposits, predevelopment spending, and the months a team spent building a deal around assumptions that didn’t hold in that state.

That risk lands squarely on the people running the pipeline: VPs of development, syndicator managing directors, LIHTC CFOs, and housing authority leaders. Getting one state’s QAP right doesn’t tell you much about the next state on the list.

This is the specific gap Shamrock Development works inside, reading each state’s current QAP against a client’s site, partnership, and capital stack before money moves, not after a scoring outcome forces a rework.

About Shamrock Development

Shamrock Development is a national affordable housing consulting firm that advises developers, lenders, syndicators, housing authorities, and investors across the United States. The firm’s core practice areas include land entitlement consulting, financial deal structuring and underwriting, LIHTC asset management, and workouts and restructuring for distressed housing assets.

Shamrock also advises clients on Opportunity Zone development, RAD conversions, and solar and battery storage integration for affordable housing properties. The firm has worked across more than 20 states over 27 years, and it is headquartered in Quincy, Massachusetts.

Frequently Asked Questions

Conclusion

A Qualified Allocation Plan determines far more than which projects get funded in a given year. It shapes site selection, cost assumptions, partnership structure, and the compliance obligations a property carries for 30 years or more, and it does so differently in every state.

For a sponsor working in a single state, that’s a document to learn once and revisit annually. For a sponsor working nationally, it’s a new rulebook at every state line, revised on its own schedule and weighted toward its own priorities.

Shamrock Development advises developers, syndicators, lenders, and housing authorities on reading that rulebook correctly before capital moves, not after an application result forces a rework. If a project’s next QAP filing needs that kind of review, contact Shamrock Development to talk through its scoring position.