NLIHC and the Public and Affordable Housing Research Corporation (PAHRC) released a jointly authored report, Picture of Preservation 2024, on December 3. As with previous editions of the report, this third iteration analyzes data from the National Housing Preservation Database (NHPD) to assess preservation risks and trends in the federally assisted housing stock. Federally assisted rental homes provide a vital supply of housing that is affordable to the lowest-income renters, given the growing shortage of private market units affordable and available to them. These homes, however, require sustained or renewed funding commitments to ensure their future affordability and habitability as buildings age and decline physically and/or their existing affordability restrictions and tenant eligibility requirements expire or come up for renewal. Mitigating these risks and preserving the existing federally assisted housing stock is essential to any effort to expand the supply of affordable housing for the lowest-income renters.
Picture of Preservation 2024 finds that five million rental homes are supported by federally funded project-based rental subsidies, representing 10% of the rental housing stock nationwide. The average federally assisted home has been affordable for 36 years. However, while an estimated 104,088 homes were added to the federally assisted housing stock in recent years, 71,096 homes were lost, resulting in a net gain of only 33,992 federally assisted homes, according to the report.
Additional findings from the report show that exit risks, the potential for program requirements to expire or be terminated, are growing throughout the federally assisted housing stock. Affordability restrictions are set to expire for 374,497 federally assisted homes in the next five years, representing 7% of the stock. Compared to 2019, non-renewable subsidies fund a larger number and share of expiring homes. The report considers non-renewable subsidies to include those provided by the Low-Income Housing Tax Credit (LIHTC), HOME Investment Partnerships (HOME), Section 202 Direct Loans, Rural Development Section 515, Section 521, and Section 538, HUD-insured mortgages, and state HFA funded Section 236 programs. In addition, for-profit ownership is now more common; this type of ownership has been shown to be more likely to exit program requirements earlier than nonprofit owners. The growing reliance on non-renewable subsidies and increasing for-profit ownership suggests that properties expiring in the next five years may face additional barriers to preservation.
Public housing, meanwhile, faces a significant and growing depreciation risk, according to the report. Depreciation risk is the likelihood that the financial stability and physical condition of federally assisted housing will deteriorate over time. Approximately 267,000 public housing homes (30%) are in developments that failed their most recent Real Estate Assessment Center (REAC) physical inspection and likely require immediate investment – twice the number that failed in 2019. One in five public housing homes are in developments that also failed two or more of their latest REAC scores, up from 9% in 2019.
Picture of Preservation 2024 finds that since 2010, key HUD project-based housing programs have lost a cumulative $21.3 billion in appropriations relative to the amount of funding that would have been available had funding been maintained in line with fiscal year 2010 levels adjusted for inflation.
One of the largest programs, the Low-Income Housing Tax Credit program (LIHTC) supports 52% of the federally assisted housing stock. The report found that LIHTC preserved an average of 34,403 federally assisted homes per year between 2010 and 2020, representing 39% of tax credit-assisted homes funded nationally. The share of tax credit-assisted homes funded to preserve affordable homes varied substantially by state during this period, from 71% in Michigan to 14% in Wyoming. An estimated 155,555 LIHTC homes allocated since 1990 lost their affordability restrictions after only 15 years, suggesting they were lost through the Qualified Contract (QC) process. The share of LIHTC homes likely lost through the QC process is the highest in Kansas, Arkansas, Nebraska, and South Dakota.
The report concludes that sound policies are needed to support preservation efforts, including more adequate annual appropriations for federal housing programs and stronger preservation protections to ensure the continued affordability and physical quality of the existing federally assisted housing stock. Especially necessary is major reinvestment to address the capital needs backlog in public housing and strengthened preservation policies through reforms to the LIHTC program, including: eliminating the QC loophole, strengthening the nonprofits’ Right of First Refusal, and extending the minimum affordability period. Without congressional action, many homes could be lost from the affordable housing stock, increasing housing instability for the lowest-income renters across the nation.
Read the full report here.