States Continue to use the LIHTC to Address the Needs of the Most Vulnerable Households
That the low-income housing tax credit (LIHTC) has been used to address the needs of vulnerable populations – seniors, people with disabilities, people experiencing homelessness, others in need of supportive services, and extremely low-income (ELI) households (those with incomes at or below the federal poverty line, or 30% of the area median income, whichever is greater) – is not surprising, and as more analysis becomes available, the extent to which the incentive is used and ways in which its use can be expanded is even more evident.
Prior to the onset of the COVID-19 pandemic, there was a shortage of 7 million affordable rental homes, 25 percent of renter households are severely rent burdened and fewer than 25 percent of eligible households receive federal rental assistance. Further, nearly 4 million low-cost units were lost between 1990 and 2017. It is an understatement to assert that the pandemic-related economic downturn has exacerbated the pre-existing affordable housing crisis. Those who find themselves among the vulnerable populations face even greater difficulty finding affordable housing and the services they require. Emergency renter assistance and protections from eviction have been authorized in response to the pandemic, but affordable housing advocates continue to fight for ways to increase the supply of affordable rental homes through expansion and targeted use of the LIHTC.
Two recent reports examine how qualified action plans (QAPs) can be used to encourage LIHTC use to benefit vulnerable populations. State QAPs, which lay out the rules by which LIHTC applications are scored and credits are awarded, details each state’s housing priorities and can be used to direct LIHTC allocations toward these goals. CSH (formerly known as the Corporation for Supportive Housing) and the National Housing Trust (NHT) on behalf of LeadingAge, both examined how QAPs have been used to encourage the creation and preservation of housing for vulnerable populations – in the case of CSH, those households are comprised of people experiencing homelessness or with disabilities, while LeadingAge is an association of organizations focused on the housing needs of seniors.
While the NHT report provides a new look at how QAPs are being used to address the needs of a vulnerable population, CSH has been assessing QAPs for over a decade. These populations face numerous difficulties in finding affordable rental housing, which were challenging to service before the pandemic and made even more difficult by the pandemic. Using QAPs to direct development is one way to ensure they have access to needed affordable homes and services.
CSH began assessing QAPs in 2009, and its 2019 QAP Data Analysis examines how states have used the LIHTC to aid households in need of supportive services. CSH estimates that there were 1.1 million individuals and families in need of supportive housing nationwide in 2019; this pre-COVID-19 estimate will surely increase as the economic downturn seen in 2020 led to increased joblessness, loss of income and “increasing housing instability.” CSH’s analysis of 2019 QAPs shows that, as in years past, all states and territories included at least one method for incentivizing housing for vulnerable individuals and families, either as part of the QAP or through an alternative state resource to be used in conjunction with the LIHTC.
States improved upon their 2018 efforts to incentivize targeting vulnerable populations. There was an increase in the number of states that either required or incentivized extended low-income periods for developments; more states included fair housing requirements that went beyond the Fair Housing Act; and there was an increase in the number of states using set-asides for ELI rental homes serving those at or below 30% of the area median income (AMI). One area where there was not a year-over-year improvement, was that fewer states required ELI units as part of a threshold in 2019 as compared to 2018. The LIHTC is a tool that can be used to ensure the most vulnerable households receive assistance and the report provides recommendations that include: defining supportive housing and ensuring quality standards; prioritizing those most in need of supportive housing; providing requirements to include ELI units; allocating tax credits for supportive housing; ensuring equitable access to housing; and, allowing points for larger families in the supportive housing set-aside.
Seniors represent another population, a growing population, that can face difficulties in securing and maintaining affordable rental housing. The NHT/LeadingAge report, Affordable Senior Housing: A Scan of State Housing Credit Allocation Plans, provides a scan of states’ QAPs to ascertain how affordable senior housing is being promoted across the country. The LIHTC is the largest annual federal expenditure for new affordable housing for older adults with low incomes, and with the nationwide shortage of homes affordable to these households, LeadingAge intends for the report to help stakeholders align scarce housing resources with needs. The report finds that across the country: seven states established a set-aside specifically for affordable senior housing; 38 states (including the District of Columbia) award points to projects specifically serving older adults; and, three QAPs provide a basis boost, ranging from 5% to 30%, for projects serving older adults.
Advocates can use this knowledge in their efforts to expand LIHTC usage for affordable senior housing by building upon priorities already included in states’ QAPs and using existing priorities as an example of what is possible in those states where no specific senior priorities exist (there are QAPs where “other priorities,” those services that may indirectly benefit senior households, are listed).
COVID-19 has exacerbated existing affordable housing shortages and stresses, but the LIHTC can be used to fill in gaps and help to address the needs of the most vulnerable populations. Both reports detail action items for how QAPs can be used to assist these households that include not only prioritizing and specifically calling out vulnerable populations in QAPs, but also how state actors can work to ensure addressing the needs of the vulnerable is included in future planning activities. In addition to having preferences outlined in QAPs, advocates can work to propel LIHTC provisions that will boost the usage of the incentive in service of the vulnerable.
Recent advocacy victories included a temporary 12.5% increase in allocation authority as part of the 2018 omnibus appropriations bill, and at the end of 2020 the establishment of a 4% minimum for the LIHTC. Other provisions, such as those included in the Affordable Housing Credit Improvement Act (AHCIA) and H.R. 2, the Moving Forward Act, can be implemented to provide the resources needed to address the housing needs of vulnerable households. One such provision is the ELI basis boost. The AHCIA proposed a 50% boost for certain units designated to serve ELI households (those earning at or below 30 percent of the area median, or the federal poverty line). H.R. 2 based its housing provisions on the AHCIA and also included a 50% ELI basis boost, which analysis shows could finance an additional 114,000 affordable rental homes, as well as a 10% increase in state 9% LIHTC allocations set aside specifically for these properties. In its list of QAP action items, CSH specifically included requirements for ELI rental homes.
With the start of a new Congressional session, the AHCIA will likely be reintroduced and Congress could include some of the AHCIA provisions in other legislation, such as an infrastructure financing bill. As states struggle with budget shortfalls and possible service cuts as a result of the effects of the COVID-19 pandemic, households that require additional services on top of a home they can afford will find themselves worse off than they were pre-pandemic, as will senior, renter households on limited budgets. Strengthening the LIHTC would provide the resources needed to address the affordable housing needs of all lower income households, and by extension, those with the greatest housing needs.
