An article published in Housing Policy Debate by Ingrid Gould Ellen and Keren Mertens Horn, “Points for Place: Can State Governments Shape Siting Patterns of Low-Income Housing Tax Credit Developments,” examines the impact of state Qualified Allocation Plans (QAPs) on the siting of affordable rental housing supported by 9% Low Income Housing Tax Credits (LIHTCs). Their research finds that QAP changes that prioritize development in higher opportunity areas are associated with a greater share of tax credit allocations to developments in low-poverty neighborhoods and a lesser share in predominantly minority neighborhoods.
Every state receives an annual allocation of LIHTCs to disburse through a state agency, often referred to as a housing finance agency (HFA). HFAs are required to develop QAPs, which set forth the criteria used to determine which projects proposed by developers receive an allocation of the credits. Housing advocates often provide input on the criteria during the QAP review process to promote certain policy objectives such as deeper income targeting, preservation of existing affordable housing, or siting affordable housing in higher-opportunity neighborhoods.
To determine the impact of QAP provisions on LIHTC siting patterns, the authors examined location criteria in QAPs from 20 states at two different points in time (2002 and 2010) and the subsequent neighborhood characteristics of LIHTC developments awarded credits for new construction and preservation. Neighborhood characteristics included poverty, racial composition, and the housing market and were measured at the census-tract level.
Looking at the change in LIHTC allocations between 2003 to 2005 and 2011 to 2013, the share of LIHTC units sited in low-poverty neighborhoods (poverty rate < 10%) increased by 3.5 percentage points; the share of LIHTC units sited in high-poverty neighborhoods (poverty rate > 30%) declined by 8.5 percentage points; and the share sited in high-minority neighborhoods (less than 10% white) declined by 6.2 percentage points.
The authors found a relationship between changes in states’ QAPs and the siting of LIHTC developments. States that began to prioritize development in higher-opportunity areas saw a subsequent increase in the share of LIHTCs allocated to developments in low-poverty neighborhoods and a decrease in the share allocated to developments in largely minority neighborhoods. It was not clear whether changes in QAP criteria led LIHTC developers to begin proposing developments in different neighborhoods, or whether states simply selected different developments to receive tax credits. Changes to neighborhood priorities in QAPs also appeared to matter more in some states, like Texas and New Jersey, than in others. Determining the precise reasons for the differences, according to the authors, requires further research.
The authors conclude that state and local housing officials should view QAPs “as critical planning tools and pay careful attention to the neighborhood priorities they communicate.”
“Points for Place: Can State Governments Shape Siting Patterns of Low-Income Housing Tax Credit Developments” is available at: https://bit.ly/2ryVBJ4