Affordable Housing Credit Improvement Act’s 50 Percent Cap Increase Could Fund More Than 200,000 Affordable Rental Homes

Published by Michael Novogradac on Tuesday, May 24, 2016 - 12:00am

Novogradac & Company estimates that the low-income housing tax credit (LIHTC) 50 percent authority increase provision in the Affordable Housing Credit Improvement Act will fund between 200,000 and 225,000 additional LIHTC units from 2017 through 2026. Starting in 2022, the year after the 50 percent increase is fully phased in, annual units financed are 21,000 to 25,000, rising to 29,000 to 33,000 in 2026.


Blog Graph Projected Increase in Affordable Rental Homes
Click to Enlarge


Specifically, the Affordable Housing Credit Improvement Act (S. 2692), sponsored by Sen. Maria Cantwell, D-Wash., co-sponsored by Sens. Orrin Hatch, R-Utah, Ron Wyden, D-Ore., and Charles Schumer, D-N.Y., and introduced May 19, proscribes 10 percent increases annually for five years until the LIHTC reaches $3.53 per capita in 2021. The small state minimum amount would also increase by 10 percent each year before reaching $4,035,000 in 2021. For 2022 and beyond, the per capita amount and small state minimum would again be subject to increase based on inflation. Over the five years of increases, the total amount of LIHTC authority available for allocation will increase by 50 percent.

About our Assumptions

To derive this estimate, Novogradac calculated the allocations per unit for the three most recent years for which data were available: 2011, 2012 and 2013. LIHTC allocations during 2008-10 were affected by the recession are not likely to be representative of future allocations. Allocation per unit is the total allocation in a given year for 9 percent credits (both for per capita states and small states whose populations are sufficiently small that they receive the small state minimum) and total number of units built (as reported in the 2013 National Council of State Housing Agencies’ Factbook). Because of the volatility and unpredictability of allocations per unit, we used the highest (roughly $15,300 in 2011) and lowest (roughly $13,200 in 2013) as a proxy for variations in the future.


This broad estimate is a promising glimpse at what Sens. Cantwell and Hatch’s LIHTC proposal could accomplish. The analysis only takes into account the 50 percent increase for the 9 percent credit, which is just one of a number of provisions in the bill that promises to increase the number of affordable rental homes financed with LIHTCs. Check this space in the coming days to get a sense of how other provisions in the Affordable Housing Credit Improvement Act will contribute to alleviating the nation’s severe affordable housing shortage.