BLUF: HUD designated 2027 Difficult Development Areas and Qualified Census Tracts, letting qualifying LIHTC projects claim a higher eligible basis.

The U.S. Department of Housing and Urban Development (HUD) published a Notice on October 6, 2026, designating "Difficult Development Areas" (DDAs) and "Qualified Census Tracts" (QCTs) for 2027 under the Low-Income Housing Tax Credit (LIHTC) program. HUD makes these designations annually, as required by statute. The notice covers all 50 states, the District of Columbia, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands.

Why it matters: Projects located in a designated DDA or QCT qualify for an increase in eligible basis up to 130 percent, which the notice states can effectively raise a 70 percent credit to as much as 91 percent. For LIHTC developers and contractors, that basis boost directly affects deal underwriting, equity pricing, and project feasibility for new affordable-housing construction and rehabilitation. The designations apply to credit allocations made after December 31, 2026, and to bond-financed buildings placed in service after that date under IRC Section 42(h)(4), so developers planning 2027 applications should confirm site eligibility against the new maps before finalizing financing.

By the numbers:

• Document type: Notice (Docket No. FR-6565-N-02)
• Published: October 6, 2026, Federal Register Vol. 91, No. 192, pages 63573-63578
• Applicability: credit allocations after December 31, 2026, or bonds issued/buildings placed in service after that date
• Basis boost: eligible basis up to 130% of normal, equivalent to up to a 30% increase in available credits
• Geographic scope: 50 states, D.C., Puerto Rico, American Samoa, Guam, Northern Mariana Islands, U.S. Virgin Islands

HUD's methodology relies on FY 2026 Fair Market Rents, FY 2026 income limits, and 2020 Census population counts. Metropolitan DDAs are identified by ZIP Code Tabulation Area, nonmetropolitan DDAs by county, each subject to a 20 percent population cap; QCTs are based on American Community Survey data from the 2018-2022, 2019-2023, and 2020-2024 periods, capped at 20 percent of a given area's population. Metropolitan Statistical Area boundaries follow OMB Bulletin 23-01, issued July 21, 2023.

Source: Federal Register