Nearly 90% of residents reported that their housing had improved after moving into a low-income housing tax credit (LIHTC) development, according to a new study.

“One in five respondents said that they had experienced homelessness before moving into their current home, and another 20% reported that they had been forced to move involuntarily, either as the result of eviction or an unsustainable rent increase,” says the report released today by the Terner Center for Housing Innovation at the University of California at Berkeley (UCB).

In addition, 50% reported that they consistently worried about paying for rent prior to moving into their LIHTC unit, and 40% said they had either worried about paying for food or skipped meals as a result of their high housing cost burdens.

The LIHTC program, which has helped produce about 3 million housing units, is the nation’s most important source of funding for affordable housing. Despite the program’s significance in the market, there’s little research on LIHTC residents and their experiences, says Carolina K. Reid, the report’s author and faculty research advisor at the Terner Center.

In an effort to better understand the role that LIHTCs play in stabilizing housing for low-income families, the Terner Center recently interviewed and surveyed more than 250 residents living in 18 family properties in both lower- and higher-poverty neighborhoods in California.

Reid and her team found that, on average, the LIHTC residents were paying $1,055 in monthly rent and that approximately 40% were devoting more than 30% of their income to rent.

For residents with a housing voucher, monthly rents were significantly lower at $644. However, overall residents—even those experiencing cost burdens—felt that their rent was “affordable.” Among survey respondents, 85.4% reported that they thought their current rent was affordable, with only 6.9% reporting that they felt their rent was too high.

Surprisingly, researchers found that 35% of the households experienced a rent increase when moving into a LIHTC apartment.

This is because many of the residents were choosing the stability of their rent payment and the quality of the housing over what they had in the private market, says Reid, an assistant professor in the Department of City and Regional Planning at UCB.

Many families had been paying less money for rent, but their housing was more precarious. For example, a construction worker with three children had been sharing a garage that was divided into six units by curtains.

The study, which was done in partnership with the California Community Reinvestment Corp., also found that:

· 75% of the respondents reported being happy with their children’s school;

· Among college-aged children, nearly 60% were enrolled in college, and more than half were in enrolled in a four-year college. Across the interviews, the most common theme that emerged was that housing stability was the most important factor that parents attributed to their children’s success;

· 23% of the responses highlighted parental concerns about neighborhood schools and particularly about the peer influences related to drugs, gangs, and premarital sex;

· About a third of the residents surveyed had a friend of family member living in the property or in another property run by the same developer while another 28% learned about the building because they passed by as it was being built; and

· Almost half of the respondents had been living in the same neighborhood before moving into their LIHTC unit.

The study also examines the links between housing and economic mobility. A policy concern has been that subsidized housing limits economic mobility or opportunity because a rental subsidy may be a disincentive to work or residents living in affordable housing may not have a “culture” of work, particularly if a significant share of their neighbors are unemployed.

“There’s a lot of rhetoric around the idea that people are low income or can’t afford housing because they’re not working,” Reid says. “… We really didn’t find that to be true at all. We found really high rates of employment among LIHTC residents.”

Researchers found that the majority, 58%, of working-age LIHTC residents surveyed were employed. Approximately half were working full time, with just over 40% working one or more part-time jobs. In addition, for those who were unemployed, 17% were looking for work but unable to find something. The majority of those who were unemployed were either in school, choosing to be a stay-at-home parent, or retired/disabled.

“Among employed LIHTC residents, jobs tended to be in lower-skilled and lower-paid industries. Common occupations included service work (restaurants, retail, hotels), domestic work (cleaning and caretaking), manufacturing (assembly and warehousing), education (teacher’s aides and preschool teachers), and construction,” says The Links Between Affordable Housing and Economic Mobility: The Experiences of Residents Living in Low-Income Housing Tax Credit Properties.

Approximately half of the working residents earned less than $35,000 a year, with 20% earning between $35,000 and $50,000 and 10% making more than $50,000. In other words, families were earning well above the national poverty rate, yet in California’s high-cost markets, these incomes were insufficient to effectively afford housing in the private market.

Policy implications

This gap between wages and housing costs has important policy implications for residents and California’s housing market, according to Reid.

“Even if residents are able to improve their incomes and even if their children go to college, the likelihood that they are going to be able to earn enough to be able to afford a comparable unit in the private market is really, really small,” she says. “There are just no middle rungs in the (housing) ladder. You’re either in affordable housing or you’re paying market-rate rents that eclipse anybody who’s making anything under $80,000.”

The study found that “more than a third of respondents had lived in their LIHTC unit for more than nine years, and just over half of respondents (54%) were the original residents of the building from when it opened its doors. LIHTC is thus providing deep and long-term subsidies to some households, but it is unlikely that these residents will ever have the significant wage growth needed to move out and open up the unit to someone new.”

This raises the question how do we ensure there are enough affordable units for new families that need them but also calls attention to the need for more of those middle-rung units, according to Reid.

“We need more housing that’s affordable to people who are making 80% to 120% of the area median income,” she says. “That’s an area where housing policy hasn’t been very effective so far.”

The study also points out that the housing credit is being called upon to accomplish a wider range of policy goals beyond just providing a safe, affordable home. To be competitive for LIHTCs in California, projects need to expand access to high-opportunity neighborhoods, offer quality residential services, and be built with high green standards, notes the report.

These are all laudable goals. “But by continually layering these goals onto the construction of affordable housing, there is a risk that the levels of subsidy that will be needed to build one unit will become unsustainable, or that we increasingly house a few households at the expense of the many who need assistance,” says the report.