Winning the LIHTC Battle but Losing the Affordable Housing War?

Reality check. The Low-Income Housing Tax Credit (LIHTC) has built and preserved a total of 3.85 million affordable units since its inception in 1987. During this time, total rent-burdened households grew from 12.5 million to 21.2 million, a 69% increase of more than 8 million households [i]. For context, the US population grew by 37% during this period. The data is clear. Despite the growth in supply of nearly 4 million affordable LIHTC units, demand for these units grew twice as fast.?

Does anyone believe the affordable housing crises will get any better continuing down this path? In 1987, we started with a huge deficit of affordable units, added the LIHTC program, and the problem has continued to get worse.

Wait, What?

LIHTC has long been and continues to be an effective tool. ?It successfully attracts private capital to finance the production of new and rehabilitated affordable rental housing. It is the only true affordable housing production tool we have and, given its success, an increase in its funding is badly needed. Yet LIHTC will never solve the growing affordable housing crises on its own.

Of course I suppose the natural response to this is to simply ask for more funding for LIHTC. This is exactly what the bipartisan bill, HR 7024, would have done if it didn’t die in the Senate this year. Unfortunately, the estimated 2 million additional units that the 12.5% increase and the 30% bond threshold was expected to bring, a nice ask in this politically charged environment, is still a drop in the bucket toward solving the affordable housing crisis.

Good News, Bad News?

The good news is LIHTC has never enjoyed more support than it has today. HR 7024 shocked many of us when it was voted out of the House with such a large bipartisan majority. It was pretty clear the LIHTC component of the bill was the key to the bipartisan support this bill received, with LIHTC provisions receiving so many positive statements from the Members of Congress before and after the vote.

The bad news is, even with increases in funding well beyond 12.5%, it is would be wishful thinking to suggest LIHTC will solve the larger affordable housing problem. In its best year, LIHTC delivered a little over 150,000 new and rehabilitated affordable rental units[ii]. To solve the affordable housing crises means significantly reducing the 21 million households that still need an affordable rental unit that don’t have one. These are the families, seniors and veterans with no housing assistance who are living paycheck to paycheck to keep a roof over their head. Some on these people live on the brink of homelessness. Based on this reality, it would appear support for expanding a broader set of housing programs is warranted.

Other Housing Programs

One such program is Housing Choice Vouchers (HCVs). HCV’s and its sister program, Project Based Rental Assistance (PBRA), provide 3.6 of the 6.4 million low-income families, seniors and veterans access to affordable rental housing via rental assistance.[iii] HCVs and PBRAs are celebrating their 50-year anniversary this year. However, legislation introduced to modernize and modestly expand these programs have been relegated to congressional purgatory. Case in point is HR 4606, the Choice in Affordable Housing Act that would modernize the Housing Choice Voucher (HCV) program. The bill has a grand total of 5 co-sponsors. This is embarrassing compared to the more than 250 Republican and Democratic co-sponsors of HR 3238, the Affordable Housing Credit Improvement Act of 2023.

?Strong Coalition

There should be no surprise here. The political process in Washington D.C. finds ways to benefit programs with broad based, dedicated constituencies, which LIHTC certainly has. For-profit and non-profit developers, regional and national syndicators, institutional investors, state agencies, attorneys and consultants have all played an important role advocating for LIHTC over the years.

This coalition was tested in 2016 with HR 1, the Tax Cuts and Jobs Act, which came very close to eliminating private activity bonds and with it half of the LIHTC program. Fortunately, after many weeks on the hill telling our story, the LIHTC coalition prevailed. I think the idea that we got so close to losing half of the program in 2016 was a wake-up call to the industry. It also galvanized support for a stronger LIHTC coalition which we have today.

Time to Open Our Eyes

But let us not be fooled. We are fighting and winning the LIHTC battle, but I’m not so sure we are winning the affordable housing war. As we can see from the trend in the chart above, one might suggest we are losing the affordable housing war. Despite the well-deserved strength of the LIHTC coalition, rent burdened households continue to rise at a much faster rate than affordable rental units can be produced.

?I realize this is a huge topic and this post doesn’t do it justice, however I hope those of you who are reading this join in on the conversation. Please feel free to repost this and share your comment below. ?Let us keep the conversation going and check out my blog for ongoing insights.

[i] Reports to Congress on Worst Case Needs from which these data are extracted are available online at https://www.huduser.gov/portal/AFWCN.html . Includes those paying more than 30% of income in rent, and/or residing in severely inadequate units as defined by HUD.

[ii] Includes both new and acquisition/rehab units with 4% and 9% credits, including all units receiving allocations in a particular year, including units carried over from an allocation in a prior year.?

[iii]Rental Assisted households refer to those who report receiving rental assistance and are

not limited to very low-income subgroups used to measure worst case needs. Data is based on HUD-PD&R tabulations of American Housing Survey (AHS) data.