Report Recommends Improvements to the Low Income Housing Tax Credit Program

A report from the Center on Budget and Policy Priorities, Low-Income Housing Tax Credit Could Do More to Expand Opportunity for Poor Families, finds that Low Income Housing Tax Credit (LIHTC) housing is disproportionately concentrated in higher-poverty and racially concentrated neighborhoods. The report suggests improvements for the LIHTC program that could support low income families’ access to low-poverty neighborhoods.

The LIHTC program typically provides funding for the development of rental housing affordable to households with incomes at or below 60% of their area median income (AMI). Thirty-four percent of LIHTC units are in high-poverty neighborhoods where the poverty rate is at least 30%, compared to 24% of all renters with household incomes below 60% of AMI and 18% of all renter-occupied housing. Only 15% of LIHTC units are in low-poverty neighborhoods with poverty rates less than 10%, compared to 28% of all rental units.

The report encourages states to use their Qualified Allocation Plans (QAPs) to more strongly support LIHTC development in low-poverty, high-opportunity neighborhoods. QAPs describe the states’ criteria for awarding tax credits to developers. To support LIHTC development in low-poverty neighborhoods, states can set aside a fixed share of credits for developments in high-opportunity, low-poverty areas; give more points in the scoring of tax credit applications for developments in low-poverty areas; or give supplemental credits in the form of a “basis boost” to developments in low-poverty areas.

States should also encourage revitalization of high-poverty neighborhoods. States are required to give preference when allocating tax credits to LIHTC development proposals in high-poverty neighborhoods with Concerted Community Revitalization Plans (CCRPs), but CCRPs are often vague and can be ineffective. Federal legislation proposed by Senator Maria Cantwell (D-WA) and Representative Carlos Curbelo (R-FL) would require states to develop specific criteria to determine whether a revitalization plan is satisfactory and realistic.

The report also highlights potential improvements to the LIHTC program to better serve the lowest income renters who often cannot afford LIHTC rents, especially in low-poverty neighborhoods. A recent change allows some LIHTC units in a development to be affordable for households with incomes at 80% of AMI as long as other LIHTC units have lower rents, making the average rent limit affordable at 60% AMI. It is hoped that this approach will provide more units affordable to lower income households.

The report encourages states to require LIHTC developments to set aside some units for extremely low income families and to provide subsidies from other programs like the national Housing Trust Fund and the HOME Investment Partnership program to help pay for them.

The report also recommends that owners of LIHTC properties in low-poverty neighborhoods inform public housing authorities about available housing for voucher holders in LIHTC properties. Public housing authorities and other organizations should also find ways to provide financial assistance to voucher holders for security deposits and moving expenses.

Low-Income Housing Tax Credit Could Do More to Expand Opportunity for Poor Families is available at: