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Difficult Development Areas (DDA)

A Difficult Development Area (DDA) for the Low Income Housing Tax Credit program is an area designated by HUD with high construction, land, and utility costs relative to its Area Median Gross Income (AMGI). All designated Difficult Development Areas in MSAs/PMSAs may not contain more than 20% of the aggregate population of all MSAs/PMSAs, and all designated areas not in metropolitan areas may not contain more than 20% of the aggregate population of the non-metropolitan counties.

Difficult Development Areas are eligible for Tax Credits at 130% of qualified basis, meaning that more of the development costs are borne by the Tax Credit funding than in areas not designated a DDA. 

HUD determines DDAs by comparing incomes with housing costs. Beginning with 2012, HUD used 2010 Census data.  Current MSA/PMSA definitions established by the Office of Management and Budget are listed for each year. The basis for these comparisons was the HUD income limits and Fair Market Rents ("FMRs") used for the section 8 Housing Assistance Payments Program. The procedure used in making these calculations follows:

  1. For each MSA/PMSA and each non-metropolitan county, a ratio was calculated.  This calculation uses the current FMR and four-person VLIL (Very Low Income Limit).
    • The numerator of the ratio was the areaís current FMR. In general the FMR is based on the 40th percentile rent paid by recent movers for a two-bedroom apartment.  In metropolitan areas granted a FMR based on the 50th percentile rent for purposes of improving the administration of HUDís Housing Choice Voucher program, the 40th percentile rent is used for nationwide consistency of comparisons.
    • The denominator of the ratio was the monthly LIHTC income-based rent limit calculated as 1/12 of 30 percent of 120 percent of the areaís VLIL (where 120 percent of the VLIL was rounded to the nearest $50 and not allowed to exceed 80 percent of the AMGI in areas where the VLIL is adjusted upward from its 50 percent of AMGI base).
  2. The ratios of the FMR to the LIHTC income-based rent limit were arrayed in descending order, separately, for MSAs/PMSAs and for non-metropolitan counties.
  3. The Difficult Development Areas are those with the highest ratios cumulative to 20 percent of the 2000 population of all metropolitan areas and of all non-metropolitan counties

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