Many LIHTC Projects Fail to Contribute to Neighborhood Revitalization Plans due to Weak Guidelines

A forthcoming paper in the Journal of Land Use and Environmental Law, The Weakness of Neighborhood Revitalization Planning in the Low-Income Housing Tax Credit Program: Warnings from Connecticut,” evaluates the implementation of the federal requirement for a concerted community revitalization plan (CCRP) for Low-Income Housing Tax Credit (LIHTC) projects sited in high-poverty neighborhoods. The CCRP requirement was intended to prevent the LIHTC program from contributing to neighborhood segregation by race and income. The authors find that Connecticut granted all applicants credit for contributing to the CCRP, even though many did not integrate revitalization considerations into their applications. This finding suggests that weak state standards result in ineffective revitalization planning, showing the need for expanding CCRP guidelines.

The authors coded a sample of 43 applications for 9% tax credit projects that were sited in high-poverty neighborhoods in Connecticut over a 10-year period. Connecticut did not begin requiring standalone CCRPs until 2019 (after the study period), so the authors chose the state as a representative case of a state with minimum CCRP standards. The authors also analyzed 19 applications located in non-high poverty neighborhoods to provide points of comparison. They focused on the question of whether an application made an argument for how the project would contribute to revitalization, and if so, how. Further, they looked at whether the application considered expenditures in the neighborhood beyond the requested LIHTC funding, and if so, whether such expenditures were new investments or already existing investments. The approach aligns with the IRS’s requirement that a CCRP must have “more components than the LIHTC project itself.”

The authors found significant shortcomings in the applications, with most not even meeting the minimum IRS requirements. Most applications did not include or reference documents focused specifically on revitalization planning, with only four applications referencing plans that discussed “revitalization” or similar concepts. These plans were not provided, so it was uncertain whether they met the standards for CCRP quality. Other applications referenced existing land use or economic development plans, but it was unclear whether these plans included sections discussing neighborhood revitalization. In this sense, the applications failed to meet the IRS’s requirement for a concrete community revitalization plan.

Eighty-eight percent of the applications discussed reasons why the project would support revitalization efforts. However, most of the reasons provided would likely apply to the housing development itself. Almost two-fifths of the applications either made no mention of external investment or only referred to long-established spending, such as for existing bus services, indicating a lack of investment in the broader community (one of the aims of the CCRP provision). There were only minor differences between applications for projects that were sited in non-high poverty areas and those sited in high-poverty areas, further illustrating that the CCRP requirement did not increase revitalization planning.

Many of the applications failed to meet the IRS’s basic requirements, and the authors found variations in the level of revitalization planning among applicants. However, every application requesting credit for contributing to CCRP was granted that credit by the state. These findings indicate that states with minimal guidelines for how to implement CCRP provisions are at great risk of entrenching the place-based inequities that the LIHTC statute was intended to avoid. The authors recommend that the IRS develop clear, strong CCRP requirements to ensure a minimum standard of revitalization planning. 

Read the paper at: https://bit.ly/3ny2J8y