LIHTC ‘Basic Building Block’ for State Housing Agencies’ Rental Housing

Published by Michael Novogradac on Friday, February 12, 2016 - 12:00am

The low-income housing tax credit (LIHTC), America’s most successful affordable housing production program, is responsible for a vast majority of affordable rental housing built in the past 30 years. Novogradac’s Low-Income Housing Tax Credit Showcase, a 166-page report that highlights the success of the program since its creation in 1986, highlights that residents benefit the most from the program. While developers, syndicators and investors also share in its success, there’s one program participant that is sometimes overlooked: state housing agencies.

Blog Low-Income Housing Tax Credit Showcase
Click to Enlarge

The LIHTC allows housing agencies in large and small states, in all regions of the nation, to access funding to ensure that their residents have safe, affordable places to live.

The LIHTC is the most important tool state housing agencies have in meeting the demand for affordable rental housing.

“Oregon Housing and Community Services understands how vital the LIHTC program is to building and rehabilitating affordable housing across Oregon,” said Julie V. Cody, that agency’s assistant director of housing finance. “Without it, we would be lacking the critical capital resources necessary to do our work.”

With some high-level guidance from Internal Revenue Service, state agencies create a qualified allocation plan for their state to prioritize developments that serve the lowest-income tenants and ensure affordability for the longest time. In addition to being able to adjust allocations for states’ priorities—as opposed to a one-size fits all, top-down federal approach—-having the LIHTC administered at the state level also reduces federal administrative costs. They oversee LIHTC allocations within their state, making difficult decisions on which of the many worthy developments to fund. Qualified applications outnumber available LIHTC authority by two or more to one. But more than that, they leverage the LIHTC to provide affordable rental housing that wouldn’t otherwise be built. It is fundamentally uneconomic to build affordable rental housing for low-income families at restricted LIHTC rents without the LIHTC assistance.

California’s housing leaders realize the LIHTC is the golden ticket to maintaining affordable housing in the Golden State. “The low-income housing tax credits are the basic building block with which we finance almost all affordable rental housing in the state,” said Jacob Roper, communications director for California Treasurer John Chiang.

In Texas, Department of Housing and Community Affairs Executive Director Tim Irvine sees the LIHTC as a multifaceted tool. “The low-income housing tax credit program is not a single success, but an amalgamation of a lot of successes,” said Irvine. “It provides affordable rental properties that are high quality and well maintained, properties that should be a source of pride in their communities.”

State housing agency leaders recognize that the LIHTC allows them to do their job by allowing the market to work. More than 90,000 rental homes are built every year through a program that provides incentives to builders and investors with relatively low cost to the taxpayers.

Texas housing leader Irvine points out that the value of the LIHTC goes well beyond four walls and a roof. “This pride is spread to the households living in these properties, helping to place them on a positive trajectory with things like access to jobs, high quality schools and community assets,” he said.

Oregon’s Cody echoed Irvine’s thoughts. “At the end of the day, the LIHTC program has built affordable rental homes for people struggling to make ends meet and has made sure they are able to not only afford rent, but also be able to put food on the table because they are no longer experiencing a severe rent burden,” she said.

California’s Roper said it’s also an economic issue. “The program allows us to build housing near job centers that is affordable to the workers who make our economy thrive. The low-income housing tax credit program is critical to California’s long-term sustainability,” he said.

Take some time to download and read the LIHTC Showcase. You’ll understand the benefit of this program to residents, investors, developers and more. But you’ll also recognize that state agencies–which represent taxpayers–gain a terrific tool to assure that affordable housing is built.