A report by Andrew Dumont from the Federal Reserve Board examines how states are using the Low Income Housing Tax Credit (LIHTC) program to help rural communities with their affordable housing needs as other federal housing resources for rural housing have declined. Some states appear to allocate more than a fair share of LIHTCs to non-metro areas, while other states appear to allocate less than a fair share.
A variety of federal programs reduce the cost of rental housing for low-income households in rural communities. USDA Rural Development (RD) has a range of programs that provide loans, rental assistance, and subsidies that enable low-income residents to afford their rent. The largest RD program is Section 515, a low-interest loan program that has resulted in the construction of over 533,000 affordable rental units since its inception in 1963. Current funding for the program is at a historic low, and virtually no new units have been produced by the program since 2011.
The LIHTC program was one of the few affordable rental housing production or preservation programs whose funding increased during the years covered in the report. Between 2005 and 2014, the LIHTC program supported nearly 10,000 additional low-income units in rural communities each year. The author determined whether rural communities received their fair share of LIHTC projects by comparing the share of each state’s cost-burdened renters who live in non-metro areas to its share of LIHTC units that are located in non-metro areas. Looking at LIHTC units placed in service between 2010 and 2014, nine states appeared to allocate significantly less than a fair share of LIHTCs to non-metro areas. Twelve states appeared to allocate significantly more than a fair share of LIHTCs to non-metro areas.
The author reviewed state Qualified Allocation Plans (QAPs) used to set the criteria by which tax credits are awarded and interviewed industry stakeholders to identify how QAP criteria may influence the use of LIHTC in rural communities. Rural-minimum set-asides, separate geographic pools, and points for rural or smaller-scale projects can have a positive impact on the use of LIHTC in rural communities. Points for proximity to amenities, on-site amenities, and on-site services, however, may have a negative impact because rural properties tend to be further from amenities than urban properties and the smaller size of rural properties makes it more difficult to provide on-site services.
Rural Affordable Rental Housing: Quantifying Need, Reviewing Recent Federal Support, and Assessing the Use of Low Income Housing Tax Credits in Rural Areas is available at: https://bit.ly/2DK8eI1