As the need for affordable housing grows across the country, low-income housing tax credit (LIHTC) supporters are keeping a close eye on the number of homes being produced under the federal program.
In 2014, LIHTCs were reserved to 1,396 developments with 98,539 affordable units, according to the latest findings from the National Council of State Housing Agencies (NCSHA).This breaks down to 1,044 developments with 62,054 affordable units receiving 9% housing credits, and 352 developments with 36,485 affordable units receiving 4% housing credits.
Digging further into the allocations, officials found that about 3,300 of the affordable units had originally received an allocation in a prior year, so they may have been counted in an earlier survey as well.
Overall, the 2014 total is down about 4.5% from the 103,122 units receiving 9% and 4% credits the year before. The number of units receiving 9% credits went up slightly (62,054 in 2014 vs. 58,823 in 2013), but the number of bond-financed units fell (36,485 in 2014 vs. 44,299 in 2013), according to NCSHA, which surveys housing finance agencies about their activities each year. The organization will release the latest findings in its annual State Housing Finance Agencies Factbook this fall.
Between 2006 and 2010, states were financing more than 70,000 units under the 9% credit program. Part of this can be attributed to a temporary 10% boost in LIHTC authority provided by the 2008 Housing and Economic Recovery Act.
“There’s been a slight decline (in LIHTC units) over the last few years,” says Jennifer Schwartz, assistant director for tax policy and advocacy at NCSHA. “It depends on how many housing credits are allocated to individual projects.”
If states are financing more developments aimed at residents further down the income spectrum, those deals often require more LIHTC equity than projects serving residents closer to the upper income limits of the program, notes Schwartz.
Rising development costs and cuts to other housing programs that help complete the development budget can also factor into LIHTC projects.
Affordable housing developers named rising development costs as their biggest concern this year in a survey by Affordable Housing Finance, which found that the average development cost per unit for new construction projects increased to $253,984 in 2015, up from $238,296 the prior year.
They’ve also faced other obstacles in recent years, including federal HOME funds being slashed by 50%—from $1.8 billion in 2010 to $900 million in 2015. The program has been an important source of gap financing for LIHTC developments. Approximately one in four (25%) LIHTC developments use HOME dollars, according to a 2015 report from Enterprise Community Partners and the HOME Coalition.
The LIHTC is the nation’s most important program for financing affordable housing. Its units serve residents earning no more than 60% of the area median income.
There’s a bipartisan effort to expand the program. Sens. Maria Cantwell (D-Wash.) and Orrin Hatch (R-Utah) have introduced legislation to expand LIHTC authority by 50%. The bill (S. 3237) also seeks to make other key improvements, including establishing a permanent minimum 4% rate for credits used to finance acquisitions and housing bond-financed developments.