The City of Laredo has been penalized by the new designation of Qualified Census Tracts (QCTs) for the state’s Low Income Housing Tax Credit programs. By statute, the portion of a metropolitan statistical area, which may be designated as a QCT, may not exceed 20 percent of the area’s MSA population. This population cap requirement grievously eliminates many low income areas with a poverty rate of 25 percent or more from consideration and, in turn, diminishes the opportunity for development of affordable housing as assisted through the Low Income Housing Tax Credit Program. The City stands to lose potential tax credits dollars. In the last three years, no applications have been submitted for the LIHTC program due to the QCT’s designation.

HUD designates Qualified Census Tracts (QCTs) for purposes of the Low-Income Housing Tax Credit (LIHTC) as required under Internal Revenue Code section 42(d)(5)(C)(ii). In general the term “qualified census tract” means any census tract which is designated by the Secretary of Housing and Urban Development and, for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income for such year or which has a poverty rate of at least 25 percent. The portion of a metropolitan statistical area which may be designated for purposes of this subparagraph shall not exceed an area having 20 percent of the population of such metropolitan statistical area.

Although the population cap on QCTs has always been a feature of the statute, until Congress changed the definition of QCTs in 2000 to make eligible census tracts with a poverty rate of 25 percent or more (in addition to tracts where 50 percent or more of households have incomes below 60 percent of area median income) the impact of the population cap became more important. By statute, the portion of a metropolitan statistical area, which may be designated as a QCT, may not exceed 20 percent of the area’s MSA population. This population cap requirement grievously eliminates many low income areas with a poverty rate of 25 percent or more from consideration and, in turn, diminishes the opportunity for development of affordable housing as assisted through the Low Income Housing Tax Credit Program.

The QCTs, as designated for the City of Laredo, County of Webb, are tracts 3, 4, 6, 7, 9.02, 12, 13, and 18.05. Tracts 3 thru 13 are within an old area of town where vacant land is no longer readily available for development. Most of it is single-family development. The infrastructure is old and would not support new multifamily development; upgrades would be required. The cost of acquisition and infrastructure upgrades would drive development costs so high that affordable housing, under the tax credit program, would not work in this market. The fastest growing areas are in the south and east parts of the community. Census Tract 18.05, which is outside the city limits, requires major infrastructure improvements, thereby making it unfeasible for multifamily housing development. Approximately half of Laredo’s census tracts qualify as low to moderate income. At one time, Census Tracts 18.01 and 18.04 were part of QCT’s but are no longer included in the current designation. Census tracts 18.01 and 18.04 are where the city is experiencing the highest growth and the highest need for affordable housing

Because QCT designations are valid for 10 years, the City of Laredo and Webb County both stand to lose potential tax credit development dollars if the QCTs are not changed. In the last round for tax credit, no applications were submitted for Laredo due to the current QCTs designations. In Laredo, there are 15 poverty eligible tracts that are not identified as QCTs because the population exceeds the 20% cap. Unjustly, there are many areas in other parts of the country that are QCT’s but maintain lower poverty rates than those in Laredo.

It is imperative that legislation be introduced that will eliminate the QCT population cap requirement and help to facilitate the use of Low Income Housing Tax Credits to develop affordable housing where it is most needed.

• U.S. Department of Housing and Urban Development
• Internal Revenue Service