We are having trouble interpreting the OCC’s definition of the “Median Rent Standard.” Page 4 of the OCC’s Community Reinvestment Act (CRA) Illustrative List of Qualifying Activities states, “Median rents that do not and are not projected at the time of the transaction to exceed 30 percent of 80 percent of the area median income are referred to in the example as meeting the ‘median rent standard.’” How is this determined? Do we take 80% of the area median income and multiply that by 30%? Or does this mean no more than 30% of the renters may have income greater than 80% of the area median income?

We believe that the median rent standard is determined by multiplying 80% of the area median income by 30%, rather than by determining that 30% or less renters have annual income greater than 80% of the area median income.

The commentary to the OCC’s June 2020 CRA rule (which now has been mostly rescinded and replaced by a rule that temporarily retains the OCC’s Illustrative List of Qualifying Activities) explains that “if banks require borrowers to ascertain the income level of current and prospective tenants before financing . . . affordable housing at the outset or on an on-going basis, borrowers may choose to forgo bank financing and seek non-bank financing to avoid the increased burdens.” Consequently, we do not believe that the OCC intended to require borrowers or lenders to determine the percentage of current and prospective tenants that have income greater than 80% of the area median income in order for financing to qualify as a community development loan. Rather, we believe the median rent standard should be determined by multiplying 80% of the area median income by 30%.

For resources related to our guidance, please see:

Community Reinvestment Act, 12 CFR 25.04(c) (“A community development loan, community development investment, or community development service is a qualifying activity if it provides financing for or supports: (1) Affordable housing, which means: (i) Rental housing: (A) That is likely to be partially or primarily inhabited by low- or moderate-income individuals or families as demonstrated by median rents that do not and are not projected at the time of the transaction to exceed 30 percent of 80 percent of the area median income. . . .”)

OCC, CRA Illustrative List of Qualifying Activities, page 4, Topic G (“*Note: Median rents that do not and are not projected at the time of the transaction to exceed 30 percent of 80 percent of the area median income are referred to in the examples as meeting the ‘median rent standard.’”)

Final Rule, Community Reinvestment Act Regulations, 85 Fed. Reg. 34734, 34742–34743 (June 5, 2020) (“To qualify under this aspect of the affordable housing criterion, the housing must be likely to partially or primarily benefit individuals or families as demonstrated by median rents that do not and are not projected at the time of the transaction to exceed 30 percent of 80 percent of the area median income. . . . While the agency understands commenters’ desire to ensure that LMI individuals or families occupy the affordable units that banks receive credit for under the CRA, in the OCC’s view, the proposed criterion is appropriate given the importance of maintaining the nation’s affordable housing stock. Adding a requirement that banks ensure that LMI individuals or families are actually occupying the unsubsidized affordable rental units would be too burdensome for banks, if not infeasible, particularly for units with long-term tenants. Such a requirement would create a competitive disadvantage that would further push banks out of LMI housing finance. Specifically, if banks require borrowers to ascertain the income level of current and prospective tenants before financing the maintenance, rehabilitation, or construction of unsubsidized affordable housing at the outset or on an on-going basis, borrowers may choose to forgo bank financing and seek non-bank financing to avoid the increased burdens. Further, banks may decide that the additional burdens do not justify providing loans to borrowers for unsubsidized affordable housing. Thus, the requirements suggested by commenters, while well intentioned, could have the long-term consequence of diminishing affordable housing options for LMI individuals and families. This would be contrary to the objective of the agency’s reform efforts regarding the CRA. Therefore, the agency is adopting this component of the affordable housing criterion as proposed with a clarifying revision.”)