"Our 15-year compliance period is ending — are we actually free of restrictions, or is there more?"
How Long Is the Restriction, Really? A 30-Year Floor, 37 at Maximum Commitment
WSHFC's own compliance manual states the baseline plainly: "Tax Credit properties allocated credit in 1990 and after were required to record a commitment to affordable housing for a minimum of thirty years. The Commission refers to this agreement as the Regulatory Agreement or the Extended Use Agreement (EUA). The first fifteen years of the EUA is called the federal Compliance Period... The IRS calls the ensuing period after the Compliance Period the 'Extended Use Period.'" That 30-year floor tracks federal law directly: the 15-year compliance period under IRC §42(i)(1), plus the minimum 15-year extended low-income housing commitment required by IRC §42(h)(6).
WSHFC layers a competitive, voluntary extension on top: current (2026-cycle) Policies §6.2 award 2 points per year of "Additional Low-Income Housing Use Period" the Applicant commits to in its Application, up to a maximum of 22 years (44 points), with the period commencing at the close of the 15-year compliance period. Policies §2.11 gives the Commission's own worked example: "If the Applicant opts for the longest extension, the total Project Compliance Period would be 37 years" — i.e., 15 (compliance) + 22 (maximum elected Additional Use Period).
This does not match an older figure referenced in some internal research notes describing a '24-year base / 45-year maximum' Additional Use Period structure with a 22-44 point range that was internally inconsistent between a summary chart and body text. That specific structure could not be located anywhere in the current, live 2026 Policies document — the current document is internally consistent (2 points × up to 22 years = the same '2-44' figure shown in both the summary chart and the §6.2 body text). A real inconsistency does exist elsewhere, though: WSHFC's own Post-Year-15 Monitoring Procedures manual (Rev. November 2024) describes streamlined monitoring as covering "years 16 through 40" of the Regulatory Agreement — which implies a longer maximum (up to 15+25=40 years) may have applied in an earlier cycle, for older-vintage properties still under monitoring today. Developers should confirm the exact Additional Use Period cap in the Policies document for their specific award year rather than relying on any single generic figure, including this one.
The Regulatory Agreement / Extended Use Agreement Mechanics
WSHFC calls the governing document the "Regulatory Agreement" for tax-exempt bond deals and the "Extended Use Agreement" for tax-credit-only deals (together, "the Agreements" — Policies §4.11). It must be recorded in first lien position as part of the Equity Closing, as a restrictive covenant running with the land and binding on successors (Policies §2.11); any prior monetary liens must be subordinated. WSHFC's own Policies note that termination before expiration of the extended-use or Additional Use Period "will occur... only under very limited circumstances," and that in this and other respects "the requirements of the Regulatory Agreement are stricter than the provisions of Section 42 of the Code."
Note for developers coming from other states: WSHFC's documents do not use the term "LURA" (Land Use Restriction Agreement), which is common California/Texas terminology — the operative Washington terms are "Regulatory Agreement" and "Extended Use Agreement." No document specifically titled "Land Use Restriction Agreement" appears in WSHFC's current Policies, Chapter 10, or Chapter 11 materials reviewed for this research.
Qualified Contract: Washington Still Runs the Process
Unlike several states that have adopted policies discouraging or effectively eliminating Qualified Contract (QC) requests, WSHFC's Tax Credit Compliance Procedures Manual, Chapter 10 ("Qualified Contract Process," last revised February 2009 and still the version published as of the Commission's own December 2024 manual table of contents), describes a live, functioning process. The "option year" is available at the Owner's election any time after year 14 of the compliance period — consistent with the federal QC-eligibility trigger in IRC §42(h)(6)(E)(i)(II) — and may be requested only once per property.
I could not find any WSHFC policy statement — in Chapter 10 itself, the current 2026 Policies document, or public WSHFC materials reviewed for this research — adopting an anti-QC stance or waiving the option, the way some other states (including several already documented for this project) have done. Chapter 10's 2009 revision date suggests it may be overdue for an update, but as published it remains the Commission's operative QC procedure. This should be confirmed directly with WSHFC's Compliance & Preservation Division for any specific deal before an investor or sponsor relies on QC being unavailable in Washington.
| Element | Detail |
|---|---|
| Administrative fee | $3,500, non-refundable |
| Third-party cost deposit | $30,000 (covers accounting review, physical needs assessment, appraisal, market study, Phase I/II environmental as needed) |
| Commission's initial review period | 90 days after receipt of complete due-diligence package, to set the Qualified Contract Price |
| Marketing/find-a-buyer period | 1 year from completion of the price-setting review |
| If no buyer found in time | 3-year post-termination tenant protections apply under IRC §42(h)(6)(E)(ii): no eviction without good cause, rent increases limited |
What Actually Changes at Year 15: The Post-Year-15 Waiver
Post-Year-15 relief is not automatic. A property must be free of Material Noncompliance for three consecutive years — compliance-period years 13–15, the "Qualifying Period" — as determined by Commission staff through annual reports and on-site inspections. The Owner must then submit a written request for a Post-Year-15 waiver to the Asset Management & Compliance Division Director; after review, the Commission issues a written waiver letter for each qualifying property. A transfer of ownership, a change of property management company, or a subsequent year of Material Noncompliance can each trigger a new 3-year Qualifying Period.
Once approved, monitoring is streamlined but not eliminated: physical inspection sampling drops from 20% of units to a minimum of 10% (minimum 5 units per visit), on a 3-year rather than annual cycle; for 100%-affordable properties, WSHFC's Self-Certification of Annual Income Form can replace third-party income verification at annual recertification (Commission staff still request a sample of new move-in packages, minimum 10% every 3 years); and compliance fees drop by $10 per unit per year ($100 flat for USDA Rural Development properties) while the property stays in good standing — this is a reduction off the base $450/$45-per-unit Annual Compliance Monitoring Fee, not a separate fee.
Two categories are excluded from these streamlined procedures: mixed-income properties (which must continue third-party verifying all household income and assets at every recertification, even after Year 15) and properties approved for Eventual Tenant Ownership (ETO) at allocation, since ETO's entire purpose is conveying rental units to tenants after Year 15.
Where this goes wrong
- Assuming a fixed 'X-year' figure (55 or otherwise) is Washington's real total restriction period — it isn't fixed; the floor is 30 years and the real total depends on the Additional Low-Income Housing Use Period years the sponsor elected at application, up to 37 years under the current (2026) cycle's 22-year cap.
- Confusing the mandatory 15-year federal Compliance Period (IRC §42(i)(1), IRS-reportable noncompliance) with the Extended Use Period/Additional Low-Income Housing Use Period that follows — WSHFC stops reporting noncompliance to the IRS after Year 15, but the property remains fully bound by every Commitment in the Regulatory Agreement/EUA.
- Assuming Post-Year-15 relief is automatic at Year 15 — it requires an affirmative written request to the Asset Management & Compliance Division Director and three consecutive Material-Noncompliance-free years (13–15); an ownership or management-company change can reset the Qualifying Period.
- Believing WSHFC has eliminated the Qualified Contract option the way some other states have — Chapter 10's process is still published and operative as of this research; sponsors should confirm WA's actual current stance with WSHFC directly rather than assuming based on other states' anti-QC policies.
- Treating the Additional Low-Income Housing Use Period commitment as renegotiable — it's made irrevocably in the Application (Policies §2.13) and cannot be reduced after allocation even if the extra scoring points are no longer competitively necessary.
- Relying on a generic Additional Use Period cap across award years — this research found the cap has apparently changed between cycles (current 2026 cycle: 22-year/44-point max; the Commission's own Nov-2024 compliance manual references monitoring through 'year 40,' implying a longer cap in an earlier cycle); always verify against the Policies document for the specific allocation year.
- Assuming Eventual Tenant Ownership (ETO) or mixed-income properties get the same streamlined Post-Year-15 procedures as standard 100%-affordable properties — ETO properties are excluded entirely, and mixed-income properties must keep third-party verifying every household at every recertification.
- Treating the post-Year-15 $10/unit/year compliance-fee reduction as a new or separate fee — it's a reduction off the same base Annual Compliance Monitoring Fee ($450 flat or $45/unit) described in Phase 10, not an additional charge.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies