Appendix O: Market Study Requirements

Applicants must commission their own Project’s market study/ies and the Applicant is responsible for confirming the market study requirements are met. The deadline to submit the market study is the same as the tax credit application deadline.   

A. General

The market study shall:

• Be in conformance with IFA requirements. 
• Be prepared by a third-party Market Study Firm in good standing with National Council of Housing Market Analysts (NCHMA).
• Provide a full-narrative Market Study Report effective within 6 months of application submission. 
  • An update of the market study can be accepted if the effective date of the original market study is within 12 months of application submission. The proposed site is required to be reinspected within 6 months of application submission. Comparable data used in rent determination and the rent comparability grid is to be updated within 6 months of application submission.
• Acknowledge the study is being completed for IFA’s use and benefit. 
• Demonstrate that there is adequate sustained demand for the proposed Project, and that the construction or rehabilitation of the additional affordable units will not have an adverse impact on the existing affordable units in the market area.
• Contain a Cover Sheet with Iowa Specific Requirements (see sample in Section O of this appendix)

The market study provider:

• Understands they may contact IFA if any change to these requirements is required based on specific market conditions.  Any changes must be approved by the Tax Credit Director prior to the study being submitted to IFA.  Please submit market study questions to [email protected].
• Understands IFA has the right to contact them when reviewing the market study but is not obligated to do so.
• Shall provide the Market Study Report in a searchable PDF format.
• Shall travel to and physically inspect a proposed site and market area.
• Shall only use photographs taken by the analyst during the site inspection.

B. Primary Market Area (PMA)

The PMA shall be the smallest geographic area from which the subject development will compete with similar properties to draw most of its residents. It implies that households within the PMA would be willing to move to or shop for housing located therein, and that rents, amenities, and other aspects of housing would be similar. PMA boundaries shall be created by census tracts, school districts, jurisdictions, street names, or other geography forming the boundaries. A map of the PMA and description shall be included. IFA will not accept radii primary market areas.

For proposed PMAs larger than 25,000 households, the market analyst is required to receive IFA approval prior to application submission. 

C. Age Restricted Units

All age restricted projects shall use the 55+ or 62+ exemption. If the age restriction in the application conflicts with a Federally subsidized program, the more restrictive age requirement shall be used to evaluate the market.

No units in the age restricted units shall have more than 2 bedrooms.

D. Substandard Housing Conditions

NCHMA Market Study Terminology Definition for “substandard housing conditions” is required to be used in the market study. Housing conditions that are conventionally considered unacceptable may be defined in terms of lacking plumbing facilities, one or more major systems not functioning properly, or overcrowded conditions.

E. Income

Market studies shall use the HUD 2026 MTSP Rent & Income Limits. Section 8 poverty guidelines calculations will not be accepted.

F. Rent Comparability Grid

Estimated market rent shall be determined for each bedroom type using the HUD Form 92273-S8 Rent Comparability Grid. The following explanations are to be included:

• Why and how each adjustment line-item was made.
• How the estimated market rent was derived from adjusted rents.
  • If the estimated market rent is higher than any comparable rents in the PMA, a narrative is required on how that amount is achievable.
• How this analysis was used for a similar unit type and project type (senior vs. multi-family).

G. Comparable and Rent Analysis

All comparable projects used for the rent determination and rent comparability grid must be in the PMA.

All LIHTC projects located in the PMA must be identified and considered in the market study analysis. If a market study provider does not want to use a LIHTC property located in the PMA as a comparable property, the analyst shall explain to IFA’s satisfaction why the project was not surveyed or considered in the analysis.  When a survey is done, if LIHTC properties have not been responsive, the market analyst may notify IFA via email at [email protected]. 

H. Rent Advantage 

IFA requires a rent advantage for proposed rents of at least 10 percent discount from the estimated market rents. If rent advantage is over 30 percent discount, a narrative is required on why higher rents are not recommended by the analyst since they would be achievable. The request for a rent advantage must:

• Quantify and discuss the market advantage of the proposed rents per bedroom size.
• Include a table that presents proposed rents by bedroom size.
• Estimate achievable market rent.
• Use the ratio of proposed rent to estimated achievable market rent. 
• Discuss the feasibility of the proposed rent levels per bedroom size and whether the proposed rent level is achievable.
• If LIHTC rents are not achievable based on the existing market conditions, recommend alternate rents or justify why future market conditions will make the proposed rent favorable. 

I. Rent Burden

The market analyst shall use a rent burden of 35 percent of a household’s monthly income for demand and capture rate calculations.

J. Capture Rate – AMI and Bedroom Size

Calculate the capture rate for each income level (market rate, 80%, 60%, 40%, 30%, etc.) proposed as well as an overall capture rate. 

The capture rate is the total number of project units divided by the total income and size qualified renter households in the PMA.

If the overall capture rate exceeds 10% for new construction and adaptive reuse projects, the market analyst shall provide an explanation and justification to be reviewed and accepted by IFA.  If an individual bedroom capture rate exceeds 25%, the analyst shall provide a narrative in the report that justifies why the unit mix is feasible, and/or provide project recommendations to lower the capture rates.  The capture rate shall consider only qualified households in the PMA.

K. Penetration Rate 

Provide a statement of penetration rate that considers all income qualified households and all income restricted units (not just LIHTC units) in the PMA only.

L. Absorption Rate

Determine the amount of time that is expected to achieve stabilized occupancy of 93% at the proposed development.  If the projected absorption rate is greater than 12 months, the analyst should provide recommendations for adjustments necessary to attain stabilized occupancy within 12 months (number of units, unit mix, AMI levels, rents, etc.).

M. Special Housing Need

If the proposed project specifies a special housing need, including but not limited to transitional housing, permanent supportive housing, or a specific population (artist, veteran, literary activities) then the specified rental population shall be analyzed to determine if it can be sustained and is suitable for the proposed project.

N. Community Service Facility 

If a community service facility is proposed, the market study must:

• Describe the proposed community service facility and how it can serve individuals whose income is 60% or less of the area median income located in a qualified census tract determined by HUD. 
• Analyze how the community service facility will improve the quality of life for the residents and improve quality of life for individuals in the community. 
• Demonstrate the facility is located within the proposed tax credit property and contains appropriate access for residents and individuals from the community. 
• Determine there would be a demand for services and the services would be affordable to people with income at 60% or below. 

O. Sample Cover Sheet for Iowa Specific Requirements

Date of last inspection and who inspected:     

Number of Households in the PMA:  

Absorption Period to reach an overall stabilization of 93% occupancy:  

Overall Capture Rate in the PMA:  

Rent Advantage Percentages Table (for each unit type):