In Vermont, a state dominated by rural towns and small cities, the people who live in low-income housing tax credit (LIHTC) developments earn an average of 33 percent of the area median income (AMI), far below the 60 percent of AMI that is allowed under the program, according an analysis by the Vermont Housing Finance Agency (VHFA).
“We serve so many more extremely low-income household than I think that the program was even designed to,” says Maura Collins, policy and planning manager for VHFA.
LIHTC units cannot serve residents earning more than 60 percent of AMI. But the apartments can be rented to people earning much less than that, provided developers can make the numbers work. The average household income of Vermont’s tax credit residents is $18,400, and half of residents are considered extremely low-income, meaning they earn less than 30 percent of the AMI.
Researchers have made similar findings nationwide. More than 40 percent of residents at communities financed with LIHTCs have extremely low incomes, according to a preliminary analysis including 8,000 developments in 15 states and encompassing nearly 480,000 apartments in a study by the Furman Center for Real Estate and Urban Policy at New York University released at the National Council of State Housing Agencies conference this summer.
In Vermont, these very low-income residents typically pay for their housing with help from some sort of rental subsidy. Almost two-thirds of LIHTC residents—61 percent—receive rental subsidies, according to VHFA. “We’ve done a really good job of matching tax credits to subsidy,” says Collins.
The tax credit program has a huge impact in Vermont. More than 5,300 units of housing financed by LIHTC are home to 9,300 people–that’s 6 percent of all the renters in the state. Relatively few of Vermont’s LIHTC residents are minorities: just 11 percent, compared to 7 percent of renters statewide.
Even though Vermont has some of the oldest residents in the U.S. on average, nearly two-thirds of the resident households in LIHTC properties—60 percent—are led by younger people under the age of 62. That’s partly because VHFA doesn’t allow its competitive 9 percent LIHTC to be used to build age-restricted housing for seniors, unless the property provides extensive service that justify the subsidy.
“The need for non-elderly households is much greater,” says Collins. Rental communities financed with tax-exempt bond and 4 percent LIHTCs, which provide less subsidy than 9 percent tax credits, are much more likely to target seniors in Vermont.