Affordable housing finance
Qualified contract
The statutory year-14 LIHTC exit: the agency gets one year to produce a formula-price buyer or extended use ends. CTCAC makes most CA deals waive it.
Definition
After year 14 of the compliance period, IRC § 42(h)(6) lets an owner ask the credit agency to present a qualified contract — a bona fide offer to buy the low-income portion at a statutory formula price (roughly, outstanding debt plus inflation-adjusted investor equity). If none appears within one year, the extended-use restriction terminates, subject to the 3-year tenant-protection tail. The mechanics are regulated at 26 C.F.R. § 1.42-18. California has largely closed the door: the CTCAC regulations have long required applicants to waive qualified-contract rights, so the path survives mainly on legacy deals.
Why it matters in an underwrite
Where it survives, the qualified contract is a genuine option on deregulation — the formula price often exceeds restricted-asset value, agencies rarely produce a buyer, and the restrictions fall away after the 3-year tail. So on any acquisition of an existing LIHTC asset, pull the regulatory agreement first: whether a waiver is in it decides if you are buying a 55-year covenant play or an asset with a deregulation option — a difference worth the entire market-to-restricted rent spread.
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.