The Federal Housing Administration (FHA) is offering reduced application fees for property owners applying for multifamily mortgage insurance for the development or rehabilitation of apartments in Opportunity Zones (OZs).

FHA said it is also designating teams of senior underwriters to review these applications to ensure timely processing.

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A few states, including Mississippi and Virginia, also are coming up with ways for the new OZs to work with their longstanding low-income housing tax credit (LIHTC) programs.

At FHA, applicants to the agency's New Construction and Substantial Rehabilitation (Sec. 221(d)(4)), Urban Renewal and Concentrated Development (Sec. 220), and Purchase or Refinance of Existing Multifamily Property (Sec. 223(f)) multifamily mortgage insurance programs will be eligible for lower application fees provided the property is located within qualified OZs.

For transactions that are defined as “broadly affordable,” application fees will be reduced from the current $3 per thousand dollars of the requested mortgage amount to $1 per thousand dollars of the requested mortgage amount, resulting in an average cost savings to applicants of approximately $28,000. “Broadly affordable” is defined as developments in which at least 90% of the units are Sec. 8-eligible or deemed affordable under the LIHTC program.

"When more investors can apply for benefits in Opportunity Zones, more investors can supply benefits in Opportunity Zones. And that's exactly the intention of today's notice," said Department of Housing and Urban Development (HUD) secretary Ben Carson. "These FHA incentives, combined with the preference points HUD already offers grantees for activities in Opportunity Zones, show how this administration is maximizing the power of public-private partnerships to never forget—and always lift up—our nation's ‘forgotten men and women.’"

For “market-rate” and “affordable” transactions, FHA will reduce application fees from $3 to $2 per thousand dollars of the requested mortgage amount, resulting in an estimated average cost savings of $14,000.

Applications must meet the following criteria to qualify for reduced fees and designated underwriting:

  • The application is submitted under FHA's Sec. 221(d)(4), Sec. 220, or Sec. 223(f) program for a property located in, or proposed to be located in, a qualified OZ, and/or:
  • The application involves an investment from a Qualified Opportunity Fund (QOF).

The new incentives offered are available immediately for applicants of market-rate properties that have not yet submitted a pre-application and for applicants for affordable properties that have not yet applied.

Created under the 2017 Tax Cuts and Jobs Act, the OZ program is intended to stimulate economic development and job creation in distressed low-income communities by incentivizing long-term capital investment. The incentive offers capital gains tax relief to those who invest in these targeted distressed areas. There are more than 8,700 census tracts designated as OZs in all 50 states, the District of Columbia, and the U.S. territories.


Officials at the Virginia Housing Development Authority (VHDA) began reviewing OZs soon after the federal program was created at the end of 2017.

VHDA has a history of awarding points in its LIHTC competition to developments in certain revitalizations areas, so it made sense to see if the LIHTC and OZ programs could work together.

The timing was also good because the agency was updating its qualified allocation plan (QAP) in 2018.

After discussing different options and working the VHDA board, officials came up with a scoring incentive. Under the new QAP, LIHTC applicants can receive 15 points if their development is in an OZ and can provide evidence of a commitment for an investment from an OZ fund, says Art Bowen, managing director of rental housing.

Not every eligible area was designated as an official OZ in the state, so officials decided not to give points for just being in an OZ. Deals also have to show a funding commitment.At the same time, officials recognize that the OZ program is in its early stages and developers are still trying to “crack the code” for how to combine it with a LIHTC project.

“We wanted to provide an incentive. If you can figure this out, if you can find a way to make these pieces work together, then we’re going to give you points for it,” Bowen says. “It was as much an incentive for people to go out and figure it out as anything else.”

LIHTC applications were submitted in mid-March. Four applicants have sought the additional OZ points.

Fifteen points is significant in the state’s LIHTC competition and can make a difference in whether a development receives housing credits.


The Mississippi Home Corp. (MHC) is committing 12.5% of its annual LIHTC authority for 2018, 2019, 2020, and 2021 for applicants in an OZ special allocation cycle.

The agency is essentially pooling the temporary increase in 9% credits that state housing finance agencies received last year to create the special round instead of adding the increase to its annual credit authority, says Scott Spivey, MHC executive director. MHC is also incentivizing developers by increasing the maximum award amount from $750,000 to $1 million.

MHC’s program is modeled on a health-care zone round that the agency created several years ago.

The special cycle will consist of two set-asides—OZs and nonprofit. In order to satisfy housing tax credit regulations, at least 10% of the available allocation will be set aside for nonprofits, with the remainder being available to OZs. An application must be for a project located in an identified qualified OZ tract in Mississippi.

Under the special cycle, developers are eligible to receive points if a development can obtain an investment from an OZ fund. Points would also be awarded for innovation, including creative partnerships, design, materials, and other features.

Applications are due this summer. Spivey estimates that about three projects will be funded under the round.

He hopes that by combining the OZ program with affordable housing, MHC can increase economic development and produce innovative housing.