Affordable housing finance
Applicable percentage
The monthly Treasury rate multiplied into qualified basis to size each year's credit — now floored by statute at 9% (competitive) and 4% (bond-financed).
Definition
The applicable percentage is the rate that turns qualified basis into an annual credit under IRC § 42(b). Treasury publishes rates monthly, calibrated so ten years of credits have a present value of 70% of qualified basis (new construction and rehab) or 30% (acquisition and bond-financed basis). Statutory floors now dominate: 9% (permanent since 2015) and 4% (fixed by year-end 2020 legislation). Owners lock the rate by election — the binding-commitment month (bond-issuance month on bond deals) — or take the placed-in-service month by default.
Why it matters in an underwrite
With both floors in statute, the credit stream is predictable arithmetic: 9% × 10 years ≈ 90% of qualified basis in nominal credits, 4% ≈ 40% — the "70/30" present-value shorthand undersells the nominal totals investors actually price. The floors were worth real money: before the 2021-era floor took hold, the floating 4% rate ran nearer 3.2%, so fixing it added roughly a quarter more credits to every bond deal.
Sources & related guides
See also
See the term in the law itself
Read the controlling text in the Code Library, or ask the AI how it applies to your project.
Last reviewed 2026-07-29. General information, not legal advice.