Program election (9% vs. 4% vs. hybrid) — Tennessee

Two federal tracks, two different rulebooks, one QAP

The 2026 QAP splits into Part II ("Competitive Allocations Only," the federal 9% credit, Sections 11-21) and Part III ("Noncompetitive Allocations Only," the federal 4% credit paired with tax-exempt bonds, Section 22). The two are not equally rationed. A 9% Initial Application is scored against a 100-point scale and must clear a minimum score of 65 points (52 points inside the PHA General Priority Category) to be eligible at all (Section 17.A). A 4%/bond deal isn't scored against competitors the same way: an Applicant applying for MTBA in THDA's online system (THOMAS) is, in the QAP's own words, "deemed to be simultaneously applying for Noncompetitive Housing Credit," with the credit amount determined by THDA's own financial-feasibility evaluation rather than a ranked competition (Section 22.A.2; MTBA PD Section 1).

The 9% side's real scale is smaller than the $1.8 million per-project cap suggests. New construction awards are allocated across six fixed regional "housing needs areas" — up to 2 developments each in the West Tennessee and Middle Tennessee Urban Areas, 1 each in the Southeast, East, and Northeast Tennessee Urban Areas, and up to 2 in the Rural/Balance of State area (Section 11.D) — a hard ceiling of roughly 9 new-construction awards statewide in a given year, on top of separate side-pools capped at $3.6 million each for Existing Multifamily rehabilitation and PHA-involved developments, and $1 million for a Permanent Supportive Housing for Homeless set-aside (Section 11.B-C). THDA's own most recent completed round under the prior QAP cycle — announced in 2025 — funded 17 developments, $25 million in annual 9% credit (an estimated $250 million over the ten-year credit period), and 988 units; this research could not confirm whether 2026-cycle awards (from the April 2026 deadline) had been announced as of this research, so treat the 2025 figures as the most recent verified scale, not a 2026 result.

The federal bond test: THDA's live practice runs ahead of its own QAP text

The 2026 QAP's own bond-eligibility language (Section 22.A.1) reads: "Applicants applying for Noncompetitive Housing Credit and MTBA must demonstrate that a minimum of 50%, or such other threshold as may be established by subsequent legislation, of the outstanding principal amount of tax–exempt bonds originally issued using an award of MTBA remain outstanding as of the placed in service date for the development." Read alone, that's the pre-2025 50 percent aggregate-basis floor, with a forward-looking hedge for a statutory change — drafted, notably, after the One Big Beautiful Bill Act (Pub. L. 119-21, enacted July 2025) had already added a lower 25 percent alternative to 26 U.S.C. §42(h)(4)(B).

THDA's own 2026 MTBA Program Description — the document that actually governs a live application, dated December 9, 2025, after the QAP's own September/December 2025 approval dates — has already moved to that lower floor. Its eligibility rule states plainly: "Applicants applying for MTBA must demonstrate that a minimum of 25% of the outstanding principal amount of tax-exempt bonds originally issued using an award of MTBA will remain outstanding as of the placed in service date for the development" (MTBA PD Section 3.A). The MTBA PD's own defined term for a supplemental bond request makes the statutory link explicit: "Supplemental MTBA" is "an allocation of THDA MTBA made to a development that has already received an allocation of MTBA, but has not yet placed in service, required to ensure that the 25% threshold as described in Section 42(h)(4)(B) of the Code to qualify for federal 4% Housing Credit can be met" (MTBA PD Section 2, Definitions).

Flag this directly rather than picking one number and moving on: the QAP is the document approved by the Governor and is technically the controlling instrument, but its bond-test sentence was written to defer to "subsequent legislation" rather than to restate a number, and THDA's own more detailed, more recently dated MTBA PD is the document that actually states an operative percentage for a 2026 application. A developer modeling a Tennessee bond deal should confirm directly with THDA's Multifamily Programs Division which figure THDA is applying to a live 2026 application before finalizing a sources-and-uses model around either the QAP's literal 50% or the MTBA PD's 25%/30%/40% structure.

Separately, THDA's own published 2026 MTBA Program Description contains an unresolved gap worth flagging on its own: the sentence stating the year's total bond-authority pool reads, verbatim, "THDA will make a total of [AMOUNT] of MTBA available in early 2026" (MTBA PD Section 5.A.1) — a literal unfilled template placeholder left in THDA's own posted document as of this research. Do not assume a specific total MTBA volume figure for 2026 without confirming it directly with THDA; it is not stated in the agency's own controlling document as fetched this session.

The Rural and Workforce Housing Tax Credit: real statute, zero funded dollars

Tennessee does have a state Low-Income Housing Tax Credit on the books, created by 2024 Public Chapter 971 (signed by Governor Bill Lee May 21, 2024) and codified at Tennessee Code Annotated §13-23-134, effective July 1, 2025. As designed, it ties directly to a project's federal LIHTC allocation, requires at least 50% of any authorized credits to go to qualified projects in USDA-eligible rural areas (with no more than 50% outside them), can be applied against Tennessee premium, retaliatory, franchise, and excise tax liability, allows a 25-year carryforward of unused credit, and is subject to proportional recapture if the federal credit is recaptured. Affordable housing developments placed in service after January 1, 2026 are the first cohort eligible to even attempt to use it.

But the statute itself withholds the one thing that makes a tax credit real money: a dollar amount. It requires the General Assembly to authorize any credit amount by joint resolution before THDA may allocate a cent. Senate Joint Resolution 27 (114th General Assembly) is the pending attempt to do that — its operative text reads: "There is authorized in calendar year 2026, $10,000,000 per year for ten years; There is authorized in calendar year 2027, $10,000,000 per year for ten years; and There is authorized in calendar year 2028, $10,000,000 per year for ten years." That is proposed language, not adopted law.

SJR0027's actual path through the General Assembly, as of this research: filed for introduction January 15, 2025; introduced and passed First Consideration in the Senate January 16, 2025; passed Second Consideration and referred to the Senate State & Local Government Committee January 27, 2025; recalled and re-referred to Senate Finance, Ways & Means February 12, 2025; referred to that committee's Revenue Subcommittee February 18, 2025; recommended for passage by the subcommittee February 25, 2025; deferred in the full Finance, Ways & Means Committee March 4, 2025; assigned to that committee's General Subcommittee March 11, 2025 — where it then sat for more than a year before being placed back on a Finance, Ways & Means calendar April 16, 2026 and reassigned to the General Subcommittee again April 20, 2026. As of this research, it had never received a floor vote in either chamber. In plain terms: the Tennessee Rural and Workforce Housing Tax Credit is a real, enacted state statute with zero funded dollars behind it. Present it to a client as enacted-but-unfunded, not as a usable capital source, and confirm current status directly with THDA or the General Assembly's own bill-tracking system before a deal is underwritten around it — a joint resolution could in principle pass mid-cycle and change this.

Consistent with that unfunded status, this research found zero references to the Rural and Workforce Housing Tax Credit anywhere in the 2026 QAP's text — no scoring category, no threshold requirement, no set-aside. THDA has not built out an allocation mechanism for a credit it currently has no authorized dollars to allocate.

Local bond issuers: Health, Educational and Housing Facilities Boards are real, but they don't bypass THDA

Tennessee's Health, Educational and Housing Facilities Boards — public nonprofit corporations chartered locally in Nashville/Davidson County, Memphis, Chattanooga, and other jurisdictions — are genuine, currently operating conduit issuers empowered under Tennessee law to issue tax-exempt revenue bonds for multifamily housing. THDA's own MTBA Program Description defines "Bond Issuer" broadly enough to include them: "A municipality, board, or housing authority with the authority to issue bonds using MTBA for a jurisdiction" (MTBA PD Section 2, Definitions) — "board" is not limited to THDA itself.

What a local board does not do is create an independent path to the 4% Housing Credit. The QAP ties Noncompetitive Housing Credit eligibility to bonds "issued as a result of an award of MTBA" (Section 22.A) — meaning the credit itself still runs through THDA's own MTBA award and THOMAS application process regardless of which entity is named as the Bond Issuer of record. A Health, Educational and Housing Facilities Board issuing bonds without a corresponding THDA MTBA award gets a sponsor tax-exempt bonds, not a Housing Credit allocation. The MTBA Firm and Conditional Commitment eligibility document lists (MTBA PD Section 6.D-E) both require an Issuer Certification, an Inducement Resolution, and evidence of a TEFRA hearing regardless of whether THDA or a local board is the actual issuer — choosing a local board changes who signs the bond documents at the local level, not who gates the tax credit.