NLIHC has released Aligning Federal Low Income Housing Programs with Housing Need, a report that explores the extent to which existing federal rental housing production programs serve the lowest income households. NLIHC found that while the Low Income Housing Tax Credit (LIHTC) program does serve extremely low income (ELI) households, those with incomes at or below 30% of area median income (AMI), they rarely do so without relying on Housing Choice Vouchers (HCV). The report also presents innovative strategies used by affordable housing developers to achieve deep affordability at their properties without relying on vouchers, and features five case studies highlighting such properties.
NLIHC drew a random sample of 104 LIHTC properties in ME, VA, FL, OH, and OR and obtained unit-level data on the properties from the respective state housing finance agencies. The total unit count was 8,758; 36% were occupied by ELI households, 35% by very low income (VLI or 31-50% AMI) households, 26% by low income (LI or 51-80% AMI) households, and 3% of units were occupied by those with incomes above 80% AMI.
One-third (32.8%) of households living in the LIHTC properties analyzed receive rental assistance; 69% of ELI households and 22% of VLI households receive rental assistance. Ninety percent of households receiving rental assistance were getting a HCV, while 8% receive assistance from an undefined source, and 2% receive USDA rental assistance. Of the remaining ELI households without rent assistance, 57% have severe cost burdens (paying more than half of household income for their LIHTC units) and 26% had a moderate cost burden (paying 31-50% of income). In this sample, only 17% of ELI households in LIHTC units without rent assistance could afford their homes.
Further, 69% of ELI households with rental assistance who live in the LIHTC properties in the sample live in units restricted at 60% of AMI, while 22% live in units restricted at 50% of AMI. Owners of LIHTC properties are able to collect rents above the 60% AMI rent level from HCV holders where payment standards are higher than that rent level. A key finding is that it appears that HCVs are a significant revenue source for LIHTC properties and allow owners to fill the higher cost LIHTC units in places where they are competing with market rate units.
NLIHC also conducted a survey of 241 affordable housing developers to learn how many are serving ELI households and how those that do serve ELI households are able to achieve that level of affordability. The survey results show that 33% of respondents have no units serving ELI households, 36% have fewer than half of their units serving ELI households, and 31% have more than half of their units serving ELI households. Fifty-six percent of the developers serving ELI households report that at least half of the ELI tenants have vouchers.
In-depth interviews were conducted with 47 developers whose survey responses indicated that they served ELI households without relying on vouchers. These interviews revealed a number of strategies used to achieve deep levels of affordability. The strategies including having a mix of units affordable to households at different income levels so that the rents paid by higher income households supplement overall project operating expenses; layering multiple funding sources; using non-traditional resources, such as private donations, to fill funding gaps; reducing or eliminating mortgage debt; and cultivating strong local partnerships with municipal and/or state governments.
From these interviews, NLIHC completed five case studies. The featured properties were located in Cambridge, MD, Jacksonville, FL, Olympia, WA, St. Louis, MO, and San Jose, CA. In the St. Louis case study, the developer, Places for People, was part of a successful advocacy effort to encourage the Missouri Housing Development Commission to set aside a portion of LIHTC funds for developments that serve people with special needs. Their development, Places at Page, was the first to receive LIHTCs under this new set-aside. It now serves 23 ELI households, many of whom were formerly homeless.
NLIHC makes a series of policy recommendations based on the findings from this report, including a proposal to change the federal LIHTC statute to provide for a third income targeting option. Currently, LIHTC developers must choose to have 40% of the units in an assisted development rent-restricted and occupied by households with incomes less than or equal to 60% of AMI, or to have 20% of the units rent-restricted and occupied by households with incomes less than or equal to 50% of AMI. NLIHC’s proposed third income targeting option would require that at least 40% of the units in a project be occupied by residents with incomes that average no more than 60% of AMI, with at least 30% of the units rent-restricted and occupied by tenants with incomes less than or equal to 30% AMI. Related to this is a recommendation to provide a 30% basis boost for properties that use NLIHC’s proposed third income averaging option.
The full report is available at http://nlihc.org/library/research/alignment.
The media release about this report is available at: http://nlihc.org/press/releases/5475.
NLIHC will be hosting a webinar to present the findings and conclusions from this report on January 14, 2015 from 2:00 pm to 3:30 pm ET. Sheila Crowley, President and CEO, Megan Bolton, Research Director, and Ann O’Hara, NLIHC Board Member and co-founder of Technical Assistance Collaborative, will be presenting. To register for the webinar go to https://attendee.gotowebinar.com/register/2001311636912577025