"We're heading into Year 15 on our Delaware property — can we get out through a qualified contract, and how does DSHA's oversight actually change once we're into the extended-use tail?"
The compliance/extended-use math: 30 years confirmed three separate ways, not assumed
The QAP's Mandatory Compliance Period threshold requirement states it without qualification: "All applicants must agree to a thirty (30) year extended low-income use for the Development, inclusive of the initial 15-year compliance period plus the 15-year extended use period" (2025-2026 QAP, Threshold Requirement #8). The QAP's Definitions section frames the same math from the other direction: the Extended Use Period is "the second fifteen (15) year period, after the initial fifteen (15) year compliance period, unless a longer period is elected." The 2024 Compliance Monitoring Manual's own Post-Year-15 chapter restates it a third time as background: "Tax Credit properties allocated credits in 1990 and after, were required to record a commitment...for an affordable housing period of a minimum of thirty years. The first fifteen years is called the compliance period...The remaining 15 years...are referred to by the IRS as the extended use period." Three independent DSHA sources, one consistent number: 30 years is the floor, not an enhancement above the federal minimum.
DSHA's Guidelines add a wrinkle worth flagging directly: the Post Tax Credit Award Documents section's Regulatory Requirements state that LIHTC applicants must agree to retain the development as rental housing "for the longer of at least thirty (30) years after permanent closing, the extended use period as elected at application, or the duration of the loan(s)." That means a deal's actual minimum restriction period is not simply 30 years in every case — a DSHA loan with a longer amortization term, or an applicant's own voluntary election to extend (see below), can each independently push the real number higher than the 30-year floor, on a deal-by-deal basis.
A scoring bonus for going past 30 years, or a different exit path entirely: homeownership conversion
Delaware's Development Characteristics scoring category offers up to 15 points under "Increase in Extended Use Period / Conversion to Homeownership": "For increases beyond the initial extended use period (consisting of 15-year compliance period plus the 15-year extended use period), five (5) additional points will be awarded for each additional five (5) year period the applicant agrees to extend the extended use period (up to an additional 15 years). Applicants that agree to an increase in the extended use period will not be permitted to re-syndicate prior to the initial 30-year period." Taken to its maximum, that scoring path can push a Delaware deal's real restriction to 45 years — well past the federal floor, entirely by the applicant's own election, and worth 15 QAP scoring points for doing so.
The alternative under the same scoring category is structurally different rather than merely longer: 10 points go to developments that convert to homeownership for residents after the 15-year Compliance Period expires, with the Extended Use Period waived entirely. That path requires a deed of easement and Declaration of Restrictive Covenants reflecting "a right of first refusal granted by the owner to the residents," units offered at fair market value at the time of the original resident's initial occupancy, a detailed marketing plan covering maintenance, tenant reserves, homeownership training, continued affordability, and sales-price calculation, and syndication documents that reflect the eventual conversion.
Qualified Contract: waived at application, not just at award — and DSHA's current materials go quiet on it after that
Delaware's Qualified Contract waiver is unconditional and attaches earlier than in many states: the QAP's Threshold Requirements state it as "Waiver of Qualified Contract" — "By submitting an application for Low Income Housing Tax Credits, the applicant waives the right to request a qualified contract under Section 42(h)(6)(E)(i) of the IRC" — meaning the waiver is triggered by the act of applying, not by winning an award or by a later Declaration signature. The same waiver is built into the QAP's own Definitions section ("The Declaration will include waiver of right to participate in the Qualified Contract Process") and repeated a third time as an owner certification checkbox on the LIHTC Application Part I itself ("Owner certifies that by submitting an application for Low Income Housing Tax Credits, the applicant waives the right to request a qualified contract under Section 42(h)(6)(E)(i) of the Internal Revenue Code").
One thing DSHA's application does still track: a due-diligence question in the Application Part I "Qualifications of Applicant" section asks plainly, "Has the Applicant requested a qualified contract (under IRS Section 42) for a DSHA tax credit property?" The QAP's own text does not specify what consequence, if any, follows from a "Yes" answer — unlike the QC-history scoring tie some other states build into their own extended-affordability scoring categories. Treat this as a disclosure item of unconfirmed practical effect rather than a scored criterion.
What this research did not find is arguably more notable than what it did: no Qualified Contract eligibility-determination process, no QC request fee, and no QC-specific inspection requirement appear anywhere in the current QAP or the 2024 Compliance Monitoring Manual — a contrast with states that keep a live, priced QC process on the books for whatever portion of their portfolio predates a blanket waiver. Delaware's silence on this point is consistent with a waiver that has applied to Delaware LIHTC applications for some time, but this research could not independently confirm how far back that waiver reaches, or how DSHA would process a QC request from a legacy allocation that might predate it. Confirm directly with DSHA for any pre-2007-era or otherwise unusual allocation.
No mandatory nonprofit Right of First Refusal was found — only the optional, homeownership-tied resident ROFR
Several other states' QAPs require a mandatory IRC §42(i)(7) nonprofit Right of First Refusal as a threshold condition of using a nonprofit set-aside. A full-text search of Delaware's 2025-2026 QAP found no such requirement — the only "right of first refusal" language anywhere in the document is the resident ROFR tied to the homeownership-conversion scoring bonus described above, which is elective (an applicant chooses that scoring path or doesn't) and runs to residents rather than to a nonprofit general partner. This is an absence finding based on the documents reviewed for this research, not an affirmative statement that Delaware law prohibits such an arrangement privately between parties — but nothing in DSHA's own QAP or Compliance Manual requires or references one.
Compliance monitoring, Years 1-15: on Treasury's own floor, with a real conflict on the correction-period length
DSHA's Initial Review requires on-site inspection of all buildings in a development "by the end of the second calendar year following the year the last building in the development is placed in service," reviewing, at minimum, 20% of low-income units and files (or the applicable HUD sample-size chart) — the federal floor under Treas. Reg. §1.42-5, not an enhancement of it. Subsequent Review continues at least once every three years on the same 20%-or-HUD-chart sample. DSHA has contracted with Spectrum Enterprises, Inc. to perform this monitoring.
Where DSHA's own documents disagree with each other is the correction-period length. The QAP's own Correction Period section states the owner must correct noncompliance "within sixty (60) days of the date of DSHA notification to correct the violation, unless a written extension is provided by DSHA" (2025-2026 QAP, p.64). The 2024 Compliance Monitoring Manual's Appendix B states a different figure: "The correction period is not to exceed 45 days from the date of DSHA notification to correct the violation. This correction period can be extended up to a total of 6 months with DSHA's approval." Both documents agree that DSHA must file IRS Form 8823 no later than 45 days after the correction period expires, regardless of whether the violation was corrected — but the underlying correction-period length itself (60 days vs. 45 days, extendable to 6 months) is a genuine, unresolved conflict between DSHA's own current QAP and its own current Compliance Manual. Confirm the operative figure directly with DSHA before calendaring a specific correction deadline.
| Requirement | Years 1-15 (Compliance Period) | Post-Year-15 (Extended Use Period) |
|---|---|---|
| Inspection cadence | Initial review by end of Year 2 after last building's PIS; subsequent review at least every 3 years | Every 5 years from the last inspection date |
| Unit/file sample | 20% of units and files, or HUD sample-size chart | Minimum of 5 units or 10% (physical inspection); file review reduced to 10% |
| Annual recertification | Required | Not required — a Self-Certification for reporting purposes only (unless RD, HUD Section 8, or tax-exempt bond property) |
| Full-time-student household rule | Applies (with statutory exceptions) | Waived — households may be 100% full-time students, no exception needed (unless Section 8) |
| Next Available Unit / Vacant Unit Rules | Apply | No longer apply |
| Form 8823 filing | Required, no later than 45 days after the correction period ends | Not filed — no federal tax consequence after the Compliance Period ends |
| Annual monitoring fee | N/A during initial period (one-time fee at allocation) | $15 per unit, due January 15 each year, for as long as DSHA has LIHTC monitoring responsibility |
To qualify for the relaxed Post-Year-15 procedures, DSHA requires the owner to be "in good standing" — continuing to comply with monitoring requirements and Declaration terms — within three years of the end of the Compliance Period; owners found in material noncompliance lose eligibility for these relaxed procedures and become ineligible for future tax credit applications.
DSHA's own Post-Year-15 chapter: real, specific relief — and a 3-year tail after the Extended Use Period itself ends
DSHA's Compliance Manual devotes an entire chapter ("DSHA Post-15 Monitoring Procedures") to streamlining oversight once the federal Compliance Period ends, explaining its own rationale: "During the extended use period DSHA must continue to monitor tax credit properties for the low-income housing commitment but is no longer required to report noncompliance matters to the IRS...Therefore, DSHA has established a policy on how tax credit properties will be monitored during the extended use period." Beyond the inspection and recertification relief summarized above, the chapter waives all minimum occupancy requirements, simplifies unit-to-unit transfers (no re-determination of the 140%-of-median threshold at transfer), and no longer requires DSHA's pre-approval of revised utility allowances — owners must simply implement updated allowances within 90 days of their published effective date.
A separate, easy-to-miss requirement sits just past the Extended Use Period's own end date rather than inside it: "During the three-year period after the extended use period expires or is terminated pursuant to IRSC Section 42(h)(6)(E)(ii), owners are required to annually submit to DSHA that no low-income residents have been evicted or displaced for other than good cause," due each January 15 for three years running — DSHA's own implementation of the federal post-termination tenant-protection period that follows an early Qualified Contract termination or a natural expiration of the Extended Use Period.
Property tax/PILOT and prevailing wage: silence in DSHA's own materials
This research found no property-tax exemption, abatement, or payment-in-lieu-of-taxes (PILOT) provision anywhere in DSHA's 2025-2026 QAP, its Guidelines, or its 2024 Compliance Monitoring Manual. That is an absence finding limited to DSHA's own published LIHTC materials, not a survey of Delaware's general property-tax code (which is administered at the county level — New Castle, Kent, and Sussex Counties each set and collect their own property taxes) — a Delaware LIHTC owner should confirm any property-tax treatment directly with the relevant county assessor rather than assume either a state-run exemption program exists or that none is available locally.
On prevailing wage: Delaware's own LIHTC program imposes no ongoing wage mandate as a condition of the Housing Credit itself. DSHA's Guidelines note that Davis-Bacon and related-act requirements are triggered only contingently — by layering in more than 11 units of HOME financing, or by combining National Housing Trust Fund dollars with other federal funding — and the Guidelines state plainly that "payment of Davis-Bacon wages is not required under [the NHTF] program except as may be required by combination with other sources of federal funding." Even where triggered, Davis-Bacon is a one-time construction-period requirement tied to the contractor's wage determinations, not a recurring obligation that follows a property into the Compliance Period or Extended Use Period. No ongoing, post-construction prevailing-wage obligation was found in DSHA's compliance-monitoring materials.
One further absence worth noting for context: unlike several other states, Delaware does not appear to operate a state tax credit paralleling the federal Housing Credit. The only "state credit" reference found anywhere in DSHA's LIHTC materials concerns Delaware's separate Historic Preservation tax credit program for qualifying historic rehabilitation work — unrelated to the Housing Credit's own extended-use tail.
Where this goes wrong
- Assuming Delaware's extended-use term runs 55 years because that's this cross-state guide's shared phase-title default. Three independent DSHA documents — the QAP's own Threshold Requirement #8, its Definitions section, and the 2024 Compliance Monitoring Manual — all confirm the floor is 30 years (15 + 15), not 55.
- Assuming 30 years is always the actual ceiling on the restriction. DSHA's own Guidelines state the real commitment runs for "the longer of" 30 years, the extended use period elected at application, or the duration of the loan(s) — a longer DSHA loan term, or a voluntary scoring election, can each independently push a specific deal's real number above 30.
- Treating the Qualified Contract waiver as something that only attaches upon award or Declaration execution. Delaware's Threshold Requirement #11 ties the waiver to the act of submitting the application itself — "by submitting an application...the applicant waives the right" — and the same language is repeated on the Application Part I signature certification.
- Expecting a live Qualified Contract fee schedule or eligibility-determination process the way some other states maintain one for legacy deals. This research found no QC process, fee, or procedure described anywhere in Delaware's current QAP or 2024 Compliance Monitoring Manual — confirm directly with DSHA for any allocation that might predate the current waiver.
- Assuming Delaware requires a mandatory IRC §42(i)(7) nonprofit Right of First Refusal the way some other states' nonprofit set-asides do. A full-text search of the 2025-2026 QAP found no such requirement; the only ROFR referenced is the elective, resident-facing one tied to the 10-point homeownership-conversion scoring bonus.
- Calendaring a noncompliance correction deadline off only one DSHA document. The QAP's own Correction Period text says 60 days; the 2024 Compliance Monitoring Manual says 45 days, extendable up to 6 months — a genuine, unresolved conflict between two current DSHA documents that should be confirmed directly with the agency.
- Assuming inspection frequency, recertification, and the Next Available Unit/Vacant Unit Rules stay on the Years 1-15 cadence once the Compliance Period ends. DSHA's own Post-Year-15 chapter drops inspections to every 5 years (minimum 5 units or 10%), replaces annual recertification with self-certification, and waives both rules entirely — but only for owners who remain in good standing within 3 years of the Compliance Period's end.
- Overlooking the 3-year tenant-protection tail that follows the Extended Use Period's own expiration or early termination under IRC §42(h)(6)(E)(ii). DSHA requires an annual January 15 certification for three years afterward confirming no low-income tenant was evicted or displaced without good cause — a distinct, later obligation from anything inside the Extended Use Period itself.
- Assuming a Delaware LIHTC property automatically receives a property-tax exemption or PILOT arrangement because of its LIHTC status. No such provision was found anywhere in DSHA's own QAP, Guidelines, or Compliance Monitoring Manual; Delaware property tax is set and administered at the county level, and this research did not extend to county-level programs.
- Assuming Davis-Bacon prevailing-wage requirements attach automatically to every Delaware LIHTC deal, or that they represent an ongoing post-construction obligation. DSHA's own Guidelines tie Davis-Bacon to specific federal-funding combinations (HOME financing above 11 units, or NHTF layered with other federal funds) as a one-time construction-period requirement, not a Compliance Period or Extended Use Period obligation.
- Assuming Delaware runs a state tax credit parallel to the federal Housing Credit, the way several other states do. No such program was found in DSHA's LIHTC materials — the only state credit referenced is Delaware's unrelated Historic Preservation tax credit.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies