A new report entitled “What Happens to Low Income Housing Tax Credit Properties at Year 15 and Beyond?”, commissioned by HUD and written by Abt Associates Inc., examines the long-term affordability of LIHTC properties and likelihood of properties maintaining affordability after the initial 15-year compliance period is over. The data from the report comes in part from a comprehensive analysis of HUD’s LIHTC database, market research and is based on interviews with syndicators, LIHTC property owners, and industry experts.
According to the report, approximately 2.2 million units were developed through the LIHTC program between 1987 and 2009 and LIHTC properties represented nearly one-third of all newly constructed multifamily rental housing during the program’s first 20 years. As a result of this development, there were nearly 400,000 units that reached Year 15 by 2009, which presents significant implications to the affordable housing supply. In the worst-case scenario, more than a million LIHTC units could leave the affordable housing stock by 2020, a potentially serious setback to efforts to provide housing for low-income households.
The HUD report finds that by 2009, 3,699 (about 32%) of the 11,290 properties examined were no longer monitored by state housing finance agencies (HFAs). However, despite the lack of affordability restrictions typically imposed on HFA-monitored properties, the authors found that the majority of these properties remained affordable after Year 15; some are owned by mission-driven entities; some are subject to other affordability mandates; other properties remain affordable simply by default because by Year 15, the restricted rents for LIHTC units were the same as market rents. The report also states that a moderate number of Year 15 properties are recapitalized as affordable housing with a major new source of public subsidy i.e. 4% or 9% tax credits, which can be used for rehabilitation or for buying the property from the original developer. The least common outcome, according to the study, are owners repositioning LIHTC properties as market-rate housing. The report does however caution that once state and local use restrictions begin to expire in the years to come, more than a million units of affordable housing are at risk of becoming market-rate properties that lower income families may no longer be able to afford.
Of the three options for LIHTC properties nearing the end of their compliance period, the authors suggest that the most likely scenario is that they remain affordable even after their use restrictions expire. The report authors also suggest that this would most likely continue to be the most common option even if no public policy tools were available to affect outcomes. However, the report authors suggest that policymakers and stakeholders do have the tools and the obligation to affect the outcomes of these properties and offer policy recommendations that would assist in not only maintaining affordability but also preserving the physical condition of current LIHTC properties and would prevent future instances of LIHTC properties losing affordability.
Click here to read the report.
