The median per-unit cost of low-income housing tax credit (LIHTC) projects was $204,000 between 2011 and 2015, according to a much-anticipated study by the U.S. Government Accountability Office (GAO), which examined development costs and cost drivers across 12 LIHTC allocating agencies.

The study also found:

· Across the 12 selected allocating agencies, median per-unit costs for new construction projects ranged from about $126,000 (Texas) to about $326,000 (California);

· Within individual allocating agencies, the variation in per-unit cost between the least and most expensive project ranged from as little as $104,000 per unit (Georgia) to as much as $606,000 per unit (California);

· The median per-unit cost of new construction projects was about $50,000 higher than for rehabilitation projects ($218,000 compared with about $169,000);

· For new construction projects, the median per-unit cost was about $38,000 higher in urban areas than in nonurban areas (about $230,000 compared with $192,000);

· For rehabilitation projects, the median per-unit cost was about $72,000 higher in urban areas than in nonurban areas (about $196,000 compared with $124,000);

· Larger projects (more than 100 units) cost about $85,000 less per unit than smaller projects (fewer than 37 units), consistent with economies of scale;

· Projects in urban areas cost about $13,000 more per unit than projects in nonurban areas:

· Senior housing developments—nearly one-third of all projects—cost about $7,000 less per unit than those for other tenants, potentially due to smaller unit sizes;

· The median per-unit LIHTC equity investment was about $147,000 for new construction projects (about 67% of the total development cost) and $103,000 for rehabilitation projects (about 61% of the total development cost); and

· The median credit price increased from about 80 cents in 2011 to about 93 cents in 2015.

The GAO analyzed a database of costs and characteristics for 1,849 projects. Agencies from Arizona, California, Chicago, Florida, Georgia, Illinois, New York, New York City, Ohio, Pennsylvania, Texas, and Washington took part in the study.

The examination comes at a time when some LIHTC developments have come under scrutiny for their high costs.

Several factors may point to why LIHTC developments may cost more than conventional market-rate projects. These include LIHTC developers having an incentive to use more durable construction components that are potentially more expensive. LIHTC agencies may also provide developers with incentives to develop historic preservation projects or add more amenities that add to the cost. The complexity of the deals can also result in higher legal, accounting, and syndication fees, according to the GAO.

The National Council of State Housing Agencies (NCSHA) commended the GAO “for its evenhanded analysis.”

“GAO’s findings are generally consistent with recent independent research commissioned by NCSHA and conducted by Abt Associates,” said the Council in a statement. “GAO’s findings also highlight the many ways state agencies that administer the housing credit are working to ensure housing credit development costs are reasonable and deliver the maximum return for the taxpayers’ investment.”

The GAO notes that no federal agency monitors or assesses LIHTC development costs, and not having an agency evaluating the housing credit’s performance is a shortcoming in the long-standing program.

The report recommends designating an agency to collect and maintain cost-related data to periodically assess development costs.

The GAO also says that the Internal Revenue Service (IRS) should require general contractor cost certifications for LIHTC projects to verify consistency with the developer cost certification. However, IRS officials disagreed with this recommendation and said it is not clear if the recommendation would uncover any misrepresentations of costs. In addition, some state agencies have implemented similar controls.

The GAO also recommends that the IRS encourage allocating agencies to collaborate with LIHTC stakeholders on the development of more standardized cost data. Again, the IRS disagreed with the recommendation.

NCSHA also said it does not believe the recommendations “would materially strengthen the housing credit and may create additional regulatory burden on states.”

For more information, read Low-Income Housing Tax Credit: Improved Data and Oversight Would Strengthen Cost Assessment and Fraud Risk.