Majority of California’s Tax Credit Homes Are Occupied by Extremely Low-Income Tenants, but Only a Small Fraction of LIHTC Units Target Them

By Julian Mura-Kröger, NLIHC Research Intern 

A recent study published in Housing Policy Debate by Ann Owens, “Who Is LIHTC Built for? The Distribution of Affordable Housing Units by Rents, Tenant Incomes, and Project Features in California,” examines rental prices, tenants’ incomes, credit types, and neighborhood features in California’s Low-Income Housing Tax Credit (LIHTC) stock. The author finds that although the majority of LIHTC tenants are extremely low-income—defined in the article as those earning 30% or less than the area median income (AMI)—only a small share of LIHTC units are targeted to them. Still, the share of California’s LIHTC units targeted to the lowest-income renters has grown substantially since 2016, most likely due to changing regulations, financial feasibility, and state priorities on housing formerly homeless individuals.   

To analyze the income targeting of LIHTC units, Owens combined data on LIHTC projects active between 2011 and 2023 from California’s Tax Credit Allocation Committee (TCAC) and the 2018-2022 American Community Survey (ACS). The TCAC data allowed the author to examine the type of tax credits projects received, if projects included housing for large families, seniors, or special needs individuals, and the income targeting of projects. The ACS provided information on the neighborhood characteristics of LIHTC projects. Additionally, the author used data from HUD to examine the incomes of LIHTC tenants between 2018 and 2022.  

TCAC’s dataset included 2,707 projects, of which 62% received 4% LIHTC credits and 38% received 9% credits. Forty percent of projects were intended for families with children, 18% for seniors, 15% for special needs occupants, and 21% were not targeted for specific demographics. When it comes to targeting LIHTC units to extremely low-income households, only 25% of units funded in 2023 were targeted to them, though this represented a significant increase from just 5% in 2016. The share of LIHTC units targeted to the lowest-income renters was larger for projects receiving 9% LIHTC credits or serving special needs (often formerly unhoused) tenants than it was for 4% credits.  

The study also revealed a significant mismatch between the income targeting of LIHTC units and the incomes of LIHTC tenants. Owens observed that extremely low-income renters accounted for 58% of LIHTC households, while only 15% of units were targeted to these renters. This suggests that the lowest-income tenants in LIHTC projects are often rent-burdened despite living in subsidized housing or needing additional subsidies to afford their homes.   

Finally, the author also examined the neighborhood characteristics of California’s LIHTC stock as it related to the income targeting of units. Owens found that, compared to units targeted to low-income renters, a smaller share of units targeted to extremely low-income renters were in the highest-resource neighborhoods, and a larger share was in the highest poverty neighborhoods. These differences, however, were modest and not always statistically significant after controlling for other factors.  

Owens concludes by noting how program regulations, especially those outlined in state qualified allocation plans (QAPs), and the financial feasibility of development are key to determining income targeting in the LIHTC program. Owens also suggests that more research is needed on tenant screening processes to better understand the mismatch between units’ affordability targets and tenants’ incomes, as no universal process currently exists.   

Read the publication here.