Report Misses Key Distinctions When Discussing Geographic Concentration of LIHTC Properties

Published by Mark Shelburne on Tuesday, January 12, 2016 - 12:00am

The fifth biennial rental housing report from Harvard University’s Joint Center on Housing Studies (JCHS), “America’s Rental Housing: Expanding Options for Diverse and Growing Demand,” released Dec. 9, 2015 finds a record 42.6 million households living in rental housing. This is an increase of 9 million households since 2005. The report also covers record demand, reduced vacancies, increasing rents, stagnant renter incomes, and the geographic concentration of low-income housing in economically disadvantaged neighborhoods.

This last finding is among the most nuanced, complex and debated aspects of affordable housing programs in general and the low-income housing tax credit (LIHTC) in particular. The JCHS study looked at the distribution of units under various subsidies as well as all rental units nationwide to compare where affordable housing units are physically located in comparison to all rental units.

The report found that, in 2013 27 percent of public housing units were located in census tracts with poverty rates of at least 40 percent, compared to 6 percent of all rental units. Further, 12 percent of these public housing units were in areas with poverty rates under 10 percent, compared to 42 percent of all rental units. The picture of affordable housing looking only at the Housing Choice Voucher and LIHTC programs is more encouraging, with affordable housing units subsidized under those programs found in a wider range of communities; 10 to 12 percent of these affordable units are found in census tracts with poverty rates of at least 40 percent and about 25 percent in tracts with poverty rates under 10 percent.

The JCHS study presents the numbers above as a whole, implying potential income, wealth and racial segregation being propagated by these affordable housing subsidies. But looking deeper into the LIHTC program reveals a very different reality than what the JCHS study implies.

To begin with, LIHTC properties are not one-size-fits-all. Rather, there are two distinct types of properties: new construction and rehabilitation. In allocating LIHTCs for property rehabilitations, program administrators are not increasing the available housing stock in a particular area. As such, funding decisions are not adding to concentrations of any kind. In fact, by encouraging redevelopment in low-income urban areas, LIHTCs allocated for property rehabilitations address the key policy goals of both providing better housing for low-income households, and preserving existing affordable rental housing and investing in those locations.

Another crucial distinction is replacement housing. LIHTCs have been used to extensively to redevelop public housing, especially in high-poverty areas. In fact, a common outcome of the HOPE VI program was to actually decrease the number of affordable rental homes on a site. The apartments themselves are often targeted to higher income levels.

These realities unfortunately are not reflected in the JCHS analysis. The same shortcomings appear in almost all research critical of the LIHTC program’s outcomes.