It seems to me that there may be some misunderstandings about this topic.

No, you are misunderstanding.

But honestly I have not read this anywhere, so there may be a misunderstanding with the city.

There is some misunderstanding here.Who allocates tax credit programs will differ state to state, who takes the lead, but it will be under your economic development office.Fed money goes to the states and then they allocate the projects.Section 42 requires the authority to approve the bonding, bonds are sold to raise the capital you don't receive the tax credits, the investors do.You also must have a syndicator and management in place that can show experience in managing tax program properties, if they mess up it disqualifies the tax credits and hen you will have big issues.A 100% development isn't a good idea really as you need some market rates for operations that can't be covered by subsidies and it gives you fluff room in keeping the units qualified.

Taking the time to carefully go through the document will allow you to fully understand your obligations as a tenant and avoid any potential misunderstandings in the future.

This not only helps to prevent misunderstandings and disputes but also promotes a sense of collaboration and mutual respect.

My SOW leaves no room for interpretation or misunderstanding. 

A misunderstanding of this information, along with attempting to build within the setback without prior approval will bite you every time.

Am I misunderstanding how the USDA loan works, or should I just go with an FHA loan?

I assure you there was no misunderstanding about the loan.