Affordable Housing to Remain Affordable

In a worst-case scenario, more than a million units of affordable housing could become market-rate properties according to a new report by the U.S. Department of Housing and Urban Development (HUD).

This could reduce a lower income family’s chances to gain access to affordable homes.

According to the report, more than 2.2 million units of affordable rental homes were made available since the initiation of the Low-Income Housing Tax Credits (LIHTC) program in 1986. But once the initial 15-year affordability period is over and all additional state and local use restrictions expire, a majority of existing stock could leave the affordability bracket by 2020.

“This report is a wakeup call to all of us interested in preserving our nation’s affordable housing,” HUD Secretary Shaun Donovan said in a statement. “As LIHTC properties age, especially in high-cost areas with escalating market demand, State Housing Finance Agencies must do everything they can to protect the opportunities for working families to live in neighborhoods they might otherwise not be able to afford.”

LIHTC is one of the most important resources for creating affordable housing in the U.S. today. The LIHTC database, created by HUD and available to the public since 1997, contains information on 33,777 projects and almost 2,203,000 housing units placed in service between 1987 and 2009.

With thousands of properties financed using the LIHTC program becoming eligible to end the program’s rent and income restrictions, the HUD’s Office of Policy Development and Research commissioned this study to analyze which path properties would take.

Usually, after year 15, properties take one of three paths: they remain affordable without recapitalization; they remain affordable with a major new source of subsidy; or they are converted to market-rate housing.

And the study found that older LIHTC properties that reached year 15 through 2009 are still owned by the original developer and that most are operating the properties as affordable housing.

However, there are exceptions - the notable exceptions being properties with for-profit owners in favorable market locations. The study found that the most likely properties to have been repositioned as unaffordable, market-rate housing are properties in low-poverty locations.

Surprisingly, even for this group of properties that should be at particularly high risk of becoming unaffordable, nearly one-half had rents less than the LIHTC maximum. About 49 percent had less than LIHTC rent, 42 percent had greater than 105 percent of LIHTC rent and only nine percent had rents slightly more than LIHTC rents, the report showed.