Population Growth Slows, but Temporary Cap Increase Boosts Ceiling for LIHTC

Published by Michael Novogradac on Tuesday, March 10, 2020 - 12:00am

The Internal Revenue Service recently released the population figures used to calculate calendar year 2020 low-income housing tax credit (LIHTC) and private activity bond (PAB) limits for all 50 states, Washington, D.C., and U.S. territories (see Notice 2020-10).  The notice reveals a national population increase of only 0.3 percent, a rate of growth below last year’s population increase of 0.4 percent–and well below the average of the previous four years of 0.7 percent. 

While there was a small overall national population increase, 17 states lost population in the past year, with the largest percentage decrease being Alaska at 0.8 percent. Twelve of these 17 states receive more than the small-state PAB minimum, which means they will see a year-over-year decrease in available PABs. Fortunately, they will not see a decrease in their LIHTC allocation, as a provision in the fiscal year 2018 omnibus appropriations bill increases the per capita 2020 (LIHTC) cap by 2 percent.  This 2 percent increase offsets the small percentage population decreases in these 17 states.

The additional 2 percent per capita LIHTC increase is part of the fiscal year 2018 omnibus appropriations bill that provided an initial baseline 12.5 percent increase in LIHTC allocations for 2018, 2019, 2020 and 2021. Novogradac estimates that the temporary 12.5 percent increase will result in an additional 28,400 homes built over 10 years, compared to the previous law.

9 Percent LIHTC Allocations
Click to Enlarge


The 2020 LIHTC cap for each state, as established by Revenue Procedure 2019-44, is the greater of two figures:

  • The state population multiplied by $2.8125, or
  • $3,217,500.

For PABs, the cap for each state is the greater of:

  • The state population multiplied by $105, or
  • $321,775,000.

The $2.8125 LIHTC multiplier is a 2 percent increase from $2.7565 last year and the $3,217,500 small-state minimum for LIHTCs increased by $50,625. The PAB multiplier stayed the same, but the small-state minimum for PABs increased by slightly more than $5 million.

The result, in the aggregate, is slightly more LIHTC and PAB allocation in 2020. Nationwide LIHTC allocation authority for 2020 will be more than $953 million, up from about $931 million in 2019. Nationwide PAB allocation authority will be approximately $38 billion in 2020, compared to $37.8 billion in 2019.

2020 Actual and 2021-2030 Projected 9 Percent LIHTC Allocations
Click to Enlarge


Big Picture, Details of Population

From 2019 to 2020, the U.S. population increased by 1,069,348 residents to 331,809,848 people, a gain of 0.3 percent. The increase is less than previous years (for comparison, the U.S. average annual growth rate from 2010 through 2019 was 0.7 percent, with the lowest year-over-year growth rate during this span the 0.4 percent from 2018 to 2019). New York saw the largest nominal drop in population from 2019 to 2020, losing 88,648 residents, but due to the increase in the per-capita multiplier, New York will receive $54.7 million in LIHTCs for 2020, compared to $53.9 million in 2019.

Following are some key takeaways.

Gaining population: Texas gained the most population from 2019 to 2020, with a 1.0 percent jump of 294,036 residents, ahead of Florida, which gained the second-most residents, with a 0.9 percent increase of 178,412. The remainder of the top 10 states to gain population, in order of nominal population increase, were:

3. Arizona (1.5 percent/107,071)
4. North Carolina (1.0 percent/104,464)
5. Georgia (0.9 percent/97,949)
6. Washington (1.1 percent/79,302)
7. South Carolina (1.3 percent/64,587)
8. Colorado (1.1 percent/63,172)
9. Nevada (1.5 percent/45,764)
10. Utah (1.4 percent/44,853)

Losing population: The 17 states that lost population from 2019 to 2020, in order of nominal population loss, were:

  1. New York (0.5 percent/88,648 fewer residents)
  2. Illinois (0.5 percent/69,259)
  3. California (0.1 percent/44,822)
  4. New Jersey (0.3 percent/26,330)
  5. West Virginia (0.8 percent/13,685)
  6. Louisiana (0.2 percent/11,184)
  7. Mississippi (0.4 percent/10,381)
  8. Massachusetts (0.1 percent/9,646)
  9. Michigan (0.1 percent/9,058)
  10. Connecticut (0.2 percent/7,378)
  11. Alaska (0.8 percent/5,893)
  12. Pennsylvania (0.04 percent/5,071)
  13. Hawaii (0.3 percent/4,619)
  14. Vermont (0.4 percent/2,310)
  15. Iowa (0.03 percent/1,075)
  16. Kentucky (0.02 percent/729)
  17. Ohio (0.0 percent/342)

The 17 states that lost population compares to 12 states that lost population from 2018-2019.

Losing streaks: West Virginia has lost population every year since 2013, marking seven consecutive years of decrease. Hawaii has lost population for five straight years and Alaska has lost population for four straight years. Five other states–Connecticut, Illinois, Louisiana, New Jersey and New York–have seen a population decrease for three consecutive years.

Most populous states: California (39,512,223), Texas (28,995,881), Florida (21,477,737) and New York (19,453,561) remain the highest-population states by a good margin. The remaining top-10 states by population are (in order)

5. Pennsylvania (12,801,989)
6. Illinois (12,671,821)
7. Ohio (11,689,100)
8. Georgia (10,617,423)
9. North Carolina (10,488,084)
10. Michigan (9,986,857)

The order of this list is unchanged from 2019.

Receiving small-state LIHTC minimum: The District of Columbia and eight states will receive the small-state minimum LIHTC allocation of $3,217,500:

  1. Alaska
  2. Delaware
  3. Montana
  4. North Dakota
  5. Rhode Island
  6. South Dakota
  7. Vermont
  8. Wyoming

Four of the five U.S. territories–all but Puerto Rico–will also receive the small-state minimum. The list of 13 states and territories receiving the small-state minimum has been the same since 2016.

Receiving less PAB cap than 2019: New York and 11 other states will see a decrease in their PAB allocation in 2020 as compared to 2019, due to having a declining population, but being large enough to receive more than the small-state minimum:

  1. New York (decrease of $9,308,040)
  2. Illinois ($7,272,195)
  3. California ($4,706,310)
  4. New Jersey ($2,764,650)
  5. Louisiana ($1,174,320)
  6. Connecticut ($774,690)
  7. Massachusetts ($1,012,830)
  8. Michigan ($951,090)
  9. Pennsylvania ($532,455)
  10. Iowa ($112,875)
  11. Kentucky ($76,545)
  12. Ohio ($35,910)

Receiving small-state PAB minimum: The small-state minimum of $321,775,000 in bond allocation will go to the same 19 entities that received the minimum in 2019:

  1. Alaska
  2. Arkansas
  3. Delaware
  4. Hawaii
  5. Idaho
  6. Kansas
  7. Maine
  8. Mississippi
  9. Montana
  10. Nebraska
  11. New Hampshire
  12. New Mexico
  13. North Dakota
  14. Rhode Island
  15. South Dakota
  16. Vermont
  17. Washington, D.C.
  18. West Virginia
  19. Wyoming

U.S. territories: The combined population of five U.S. territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico and U.S. Virgin Islands) declined by 2,741 people–less than 0.1 percent. Only Guam saw an increase in population among the five territories. This continues a trend: the U.S. territories have lost population in every year since 2014.