1. (a) In preparing its analysis of the need for the proposed development in the market area, it is the responsibility of the market analyst to be aware of the applicable income and gross rent restrictions and requirements of the applicable affordable housing assistance program (e.g., LIHTC, HOME, tax-exempt bond).

2. (b) Need must be calculated using an income range based upon the:

   1. (1) Minimum annual income of eligible households (the amount of income a household must make in order for no more than thirty percent (30%) of its annual income to be utilized for payment of the annual proposed gross rent set for the unit size (e.g., zero (0) bedroom, one (1) bedroom, two (2) bedrooms, etc.) and type (e.g., LIHTC, HIGH-HOME, LOW-HOME, tax-exempt bond, market rate)); and
   2. (2) Maximum annual income a household can make for the unit size and type and still be income-eligible under the applicable program restrictions and restrictions as represented in applicant’s application to the Arkansas Development Finance Authority, i.e., thirty percent (30%) or fifty percent (50%) of area median income restricted units per the application’s representations.

3. (c)

   1. (1) The percentage of annual household income that can be used to determine the minimum annual household income amount, based upon the gross rent set for the unit, is thirty percent (30%).

   2. (2)

      1. (A) The maximum annual household income amount that can be taken into account for the restricted units in the development is the maximum annual household income allowed for the targeted income group, e.g., thirty percent (30%), fifty percent (50%), or sixty percent (60%) of the area median income, for the unit type (e.g., LIHTC, HIGH-HOME, LOW-HOME, tax-exempt bond, market rate) based upon two (2) persons per bedroom.
      2. (B) However, the maximum annual household income for efficiency units with zero (0) bedrooms must be based upon a one-person household.

4. (d) A separate need analysis must be performed for each group of units in the development of the same:

   1. (1) Type (e.g., LIHTC, HIGH-HOME, LOW-HOME, market rate);
   2. (2) Gross rent;
   3. (3) Targeted income group (e.g., thirty percent (30%), fifty percent (50%), or sixty percent (60%) of the area median income); and
   4. (4) Bedroom size.

5. (e)

   1. (1) Income-eligible households cannot be double counted, meaning an income eligible household cannot be taken into account in the need analysis of more than one (1) group of units in the development.
   2. (2) The market analyst must distribute income-eligible households, which overlap into more than one (1) group of units, by pro rating among those groups or among those groups on a reasonable basis as identified and explained by the market analyst.
6. (f) All rents utilized by the market analyst and on which the market study is premised must equal the amount of assumed rents for each unit type (or, for each unit, if assumed rents vary within a unit type) set forth in the application for housing tax credits.

7. (g)

   1. (1) Each need analysis must be based upon the following components:

      1. (A) Family developments. The sum of:

8. (i) Income-eligible renter households projected to move into the market area the calendar year of market entry for such development; and

   1. (ii) Existing income-eligible renter households, as of the calendar year of market entry for such development, that have any one (1) of the following housing problems:
9. (a) (a) Rent over-burdened, meaning the household is paying more than thirty percent (30%) of its annual income to gross rent;

10. (b) (b) Overcrowded, meaning the household has 1.01 or more persons per room living in the unit; or

    1. (c) (c) Living in substandard housing unit, meaning unit does not have complete kitchen or plumbing facilities;

       1. (B) Independent senior developments. The sum of:

          1. (i) Income-eligible renter households projected to move into the market area the calendar year of market entry for such development;
          2. (ii) Existing income-eligible renter households, as of the calendar year of market entry for such development, that have any one (1) of the following housing problems:
11. (a) (a) Rent over-burdened, meaning the household is paying more than thirty percent (30%) of its annual income to gross rent;

12. (b) (b) Overcrowded, meaning the household has 1.01 or more persons per room living in the household; or

    1. (c) (c) Living in substandard housing units, meaning unit does not complete kitchen or plumbing facilities; and

       1. (iii)
13. (a) (a) Income-eligible senior homeowners likely to convert to renters.

14. (b) (b) This category may only be included if the market analyst has surveyed all existing affordable senior renter developments in the market area and determined that percentage of current households in those developments whose tenants were homeowners immediately prior to leasing in the senior development at which they currently live;

    1. (C) Assisted living developments. The sum of:

       1. (i) Income-eligible households, a member of which meets the medical criteria set forth in Section 26205II. of the Medical Services Policy Manual for the Department of Human Services, that are projected to move into the market area the calendar year of market entry for such development;

          1. (ii) Income-eligible households, a member of which is at least seventy-five (75) years old, that are projected to move into the market area the calendar year of market entry for such development;
          2. (iii) Existing income eligible households, not living in an existing assisted living facility, a member of which meets the medical criteria set forth in Section 26205II. of the Medical Services Policy Manual for the Department of Human Services;
          3. (iv) Existing income-eligible households, not living in an existing assisted living facility, a member of which is at least seventy-five (75) years old; and
          4. (v) Existing income-eligible households living in an existing assisted living facility but are rent over-burdened, meaning the household is paying more than thirty percent (30%) of its annual income to gross rent; and

       2. (D) Supportive housing for disabled persons developments. The sum of:

          1. (i) Income-eligible households, a member of which is disabled and need housing and supportive services to be provided by the development, that are projected to move into the market area the calendar year of market entry for such development;
          2. (ii) Existing income-eligible households, a member of which is disabled but not living in a supportive housing development; and
          3. (iii) Existing income-eligible households, a member of which is disabled and living in a supportive housing development but are rent over-burdened, meaning the household is paying more than thirty percent (30%) of its annual income to gross rent.

    2. (2)

       1. (A) All market studies shall utilize December 31 of the year that is two (2) years from the anticipated year of allocation as the market entry date of the development, i.e., December 31, 2013, shall be the assumed market entry date for all proposed developments applying for credits in 2011.
       2. (B) An alternate market entry date or dates may be included in the study, but December 31 of the second year must be included in the market study.

15. (h) Capture rate.

    1. (1) Each needs analysis must calculate the capture rate of its group of units from the net number of households in the market area that are income eligible and in need of the housing proposed.
    2. (2) The capture rate is determined by dividing the number of units in the proposed group of units by the net number of households in the market area in need of the housing proposed.

    3. (3)

       1. (A) The net number of households is determined by subtracting existing, vacant comparable units in the market area, proposed comparable units in the market area that have not yet been placed in service, and, in the case of rehabilitation developments, current households that will not be eligible to remain in the development, from the number of households determined to need the proposed housing in the market area.
       2. (B) "Comparable units" are those units with comparable gross rents, bedroom size, and purpose (e.g., family, senior, assisted living, supportive housing) as those proposed in the development.

    4. (4) If the market analyst excludes any comparable, vacant unit from the net number of households, the market analyst must give a detailed but concise explanation for the exclusion.

       1. (i) Format. A format similar to the following should be used to summarize the results of each needs analysis:

          Summary of need for 3-1br at 30% income level:
          Total income eligible households (p. 61 of market study):	76
          29.8% of households are renters (p. 23 of market study):	23
          49.1% are rent overburdened households (p. 67 of market study):	12
          Net number of income eligible households:	12
          Capture rate (3/12):	25%
          Summary of need for 5-2br at 50% income level (LOW-HOME):
          Total income eligible households (p. 61 of market study):	618
          29.8% of households are renters (p. 23 of market study):	185
          49.1% are rent overburdened households (p. 67 of market study):	91
          Less vacant comparable units (Fayetteville; Springdale, Arkansas)	-2
          Net number of income eligible households:	89
          Capture rate (13/89):	14.61%
          Summary of need and demand for 7-3br at 60% income level (HIGH-HOME):
          Total income eligible households (p. 61 of market study):	152
          29.8% of households are renters (p. 23 of market study):	46
          49.1% are rent overburdened households (p. 67 of market study):	23
          Net number of income eligible households:	23
          Capture rate (7/23):	30.43%
          Summary of need and demand for 12-3br at 60% income level:
          Total income eligible households (p. 61 of market study):	307
          29.8% of households are renters (p. 23 of market study):	92
          49.1% are rent overburdened households (p. 67 of market study):	46
          Income eligible households projected to move in year of market entry:	3
          Net number of income eligible households:	49
          Capture rate (12/49):	24.49%

Codification Notes: "LIHTC" means low-income housing tax credit. This section as promulgated prior to codification into the Code of Arkansas Rules contained the following footnotes: A footnote to subdivision (b)(1), immediately following the phrase, "based upon the gross rent set for the unit," provided as follows: "2 The gross rent for the affordable units in the development is that amount restricted for the unit type by law, e.g., (e.g., LIHTC, HIGH-HOME, LOW-HOME, Tax-exempt, Market Rate)." Two footnotes to subdivision (b)(1), immediately following the phrase, "is thirty percent (30%)" provided as follows: "3 This percentage is based upon Section 42(g)(2)(A) of the Internal Revenue Code and HUD's statement that: "The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation, and medical care." The percentage must be applied for both affordable and market rate units. 4 If the development will have a rental assistance contract, the minimum annual household income amount is $0.00 for those units receiving the rental assistance. The market analyst must describe the terms of the rental assistance contract and identify which units will receive the rental assistance contract." A footnote to subdivision (b)(2)(A) provided as follows: "5 Arkansas Code Annotated § 16-123-307(c)(3) provides: "An occupancy limitation of two (2) persons per bedroom residing in a dwelling unit shall be presumed reasonable in this state or any political subdivision of this state."" A footnote to subdivision (f)(1)(A)(i) provided as follows: "6 The market analyst cannot include households under categories identified as "leakage" or "spill-over" for areas outside the Market Area. Categories of this type should be included in the households projected to move into the Market Area."