(A) In general Notwithstanding any other provision of this section, the housing credit dollar amount with respect to any building shall be zero unless—

(iii) a comprehensive market study of the housing needs of low-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer’s expense by a disinterested party who is approved by such agency,

Section 42 of the IRS Code

On January 18, 2006 my firm was engaged by the North Carolina Housing Finance Agency (NCHFA) to complete five tax credit market studies. The NCHFA market study guidelines required analysts to submit primary market area (PMA) conclusions to the agency for review prior to completing our reports. We did our research, provided our conclusions, and obtained notification from the Agency that they “agreed” with our market area determinations prior to commencing with our studies. NCHFA guidelines also called for the use of 2-person households when computing demand for age restricted projects. This is exactly what our market research suggested.

On February 27, 2006 we completed our research, wrapped up five 200-page reports, and certified our findings to the agency. I personally certified the reports with the following required language: “To the best of my knowledge, the market can support the demand shown in the study.”

Four of our reports were elderly. One of these elderly projects was in Asheville. Our analysis indicated that the Asheville elderly project had significant unit mix and income targeting problems. It appeared that the developer was proposing to build too many 2-bedroom units at 60% of AMI. There just were not enough potential renters earning between $20,070 and $23,900 in our PMA to fill these units quickly.

The developer – a large national firm – obtained a copy of our report and challenged our conclusions. After meeting with the developer, NCHFA requested that we increase our PMA and the number of persons in the 2-bedroom units for this project. We were not invited to the meeting.

On March 15, 2006 I received a voice mail message from Tara Hall, market study coordinator with NCHFA, with the following request: “We need you to increase the PMA for the Asheville projects.”

On March 23, 2006 I received an e-mail from Ms. Hall with the following request: “In an effort to maintain consistency across the board, we will need to request an extension of the income limits for a 2BR elderly unit to include 3 persons.”

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