Adjustment Modules

Concerns

Proposing a tiebreaker focused on tax credit efficiency generates concerns of fairness as certain types of projects need more credits than others to be feasible. These concerns come in two standard formats.

My organization does [XYZ], increasing our credit request and putting us at a disadvantage.

a.      Builds in highly populated areas with high rents and high median incomes

b.      Builds family units with more residential square footage than senior units

c.       Funds supportive services for special needs, reducing conventional debt raised

My organization does [ABC], making our units more impactful but we get no advantage.

d.      Promotes sustainable communities through transportation related improvements

e.      Builds new units compared to merely rehabilitating affordable units

f.        Builds in high resource areas, increasing opportunities for children

Response

If policy makers deem a project characteristic worthy of protection from such a disadvantage, the effect of that characteristic can be neutralized by including an adjustment module to the tiebreaker. For example: if the Committee deems infill projects should not be disadvantaged and research concludes infill sites cost 30,000 more per unit to develop, the tiebreaker should include an adjustment module to neutralize this effect. A 60 unit infill project (that needs 13.8 million credits) will have its score improved by reducing the denominator by 1,800,000 (60 * 30,000).

If policy makers deem a project characteristic worthy of an advantage, the effect of that characteristic can be simulated by including an adjustment module to the tiebreaker. For example: if the Committee deems family projects in high resource areas should be advantaged and policy minds feel 60 units with this characteristic provide the same public benefit as 66 without it, the tiebreaker should include an adjustment module in the numerator to simulate this effect. A 60 unit family-high-resource-area project will have its score improved by adjusting the numerator to 66 (60 * 110%).

Options

While these examples are overly simple, more detailed and thoughtful calculations can be derived using research and good reason. Adjustment modules can be designed to neutralize, incentivize, or disincentivize any measurable project characteristic. They can make static, adjustable, or diminishing  adjustments that level the playing field for projects serving different populations, located in areas with different cost structures, and or providing added value.

The beauty of using adjustment modules to level the playing field (rather than being indifferent to costs) is that developers are left with decisions at the margin (to add units and or lower credits requested) after policy protections/incentives have been accounted for.

If we are to incentivize production we must do so in a fair and responsible manner.