A paper recently released by Katherine O’Regan, Associate Professor at NYU Wagner Graduate School and the Furman Center and Keren Horn, Assistant Professor of Economics at the University of Massachusetts Boston, describes the incomes and rent burdens of tenants living in Low Income Housing Tax Credit (LIHTC) properties. This is the first time this type of analysis has been conducted on the LIHTC program, which is currently the largest federal affordable housing production program. The authors used tenant-level data from 15 states, representing over 30% of all LIHTC units and all regions of the country.
The authors found that LIHTC recipients tend to have higher incomes than households assisted by other federal rental assistance programs, but that the LIHTC program does serve a significant number of extremely low income (ELI) households, those earning at or below 30% of the area median income (AMI). Approximately 75% of all households served by HUD programs such as public housing, vouchers and project-based Section 8 are ELI, compared to 43% of LIHTC households. Moving up the income scale, the study reveals that 37% of LIHTC households earn between 31-50% of AMI, 14% earn between 51-60% of AMI and the remaining 7% earn above 60% of AMI.
According to the report, approximately 46% of LIHTC recipients receive some other form of rental assistance. Only 10 out of the 15 states analyzed in this report had data on rental assistance, and of the LIHTC households with rental assistance in those 10 states, close to 78% were ELI, while just 31% of those without rental assistance were ELI. Furthermore, rental assistance was higher among existing tenants than among those first moving into LIHTC housing. The authors suggest that this may be because turnover tends to be lower for households with rental assistance than those without, resulting in the majority of available units being without rental assistance. Multiple studies also found that the larger the share of a state’s LIHTC households receiving rental assistance, the larger the share of ELI tenants.
The report also examines the rent burdens of tenants living in LIHTC properties. Because the rents charged at LIHTC properties are not based on the actual income of the household occupying the unit, as is the case with most HUD programs, there is a greater chance that LIHTC households will spend more than 30% of their income on rent and utility costs. The analysis shows that 42% of LIHTC tenants have a rent burden between 31% to 50%, while 17% are severely rent burdened, paying over half of their income on housing costs.
The analysis also reveals that rent burdens vary depending on income, with 31% of ELI households facing a severe rent burden, compared to just 0.2% of households earning above 50% of AMI. However, when examining just those LIHTC households without rental assistance, the number of ELI households facing a severe rent burden jumps to 57%. Because the federal statute sets LIHTC maximum rents to be affordable at either 50% or 60% of AMI, one would expect almost all ELI households without rental assistance to face a severe cost burden.
The authors suggest two factors that may contribute to lower rent burdens among these households. First, many developers may have committed to lower rents when applying to the program. Second, other owners may set rents below the federal levels for mission or market-driven reasons. In fact, the report finds that in LIHTC units without rental assistance almost all (99%) of households are paying rents at or below the maximum allowable rents, and 43% are paying rents that are less than 80% of the maximum allowable rent. Furthermore, 81% of units without rental assistance that charge rents that are at least 50% below the allowable maximum rent are occupied by ELI households.
The authors conclude by recognizing the limitations to this analysis, including the fact that not all states are represented in this sample. There is now a mandate from Congress that state housing agencies collect and provide tenant data for LIHTC properties, so the hope is that a more comprehensive analysis of these data will be possible in the near future.
The full report, What Can We Learn about the Low Income Housing Tax Credit Program by Looking at the Tenants?, is attached.