The average rent for low-income housing tax credit (LIHTC) properties was 38% lower than average market-rate rents in nine markets analyzed by Freddie Mac.
Families in LIHTC apartments also benefited from more stable and predictable rent growth. Since 2012, market-rate rents in the studied markets averaged 5% growth per year, with annual rent spikes of more than 7% in seven of the markets. In contract, the LIHTC rents grew an average of just 0.9% annually, with the greatest annual spike less than 5.5%, according to the study.
“Averaged across all nine of the surveyed markets in 2017, a renter in a market-rate unit spent $7,500 more per year in rent than a renter in a similarly sized two-bedroom LIHTC unit. In high-cost areas, such as Hudson County, N.J., the difference was even greater, totaling more than $22,000 in annual rent savings in a restricted unit,” finds the study by Freddie Mac Multifamily’s Research and Modeling team.
The federal LIHTC program is the nation’s main source of financing for the development and rehabilitation of affordable housing. Since its creation in 1986, the housing credit has financed 3 million affordable apartments, providing homes to about 7 million low-income households.
However, there aren’t enough LIHTC apartments for the many eligible families, and these households have no alternative but to pay market rents.
"Our analysis shows that in a given year, renters living in LIHTC and other rent-restricted properties can save thousands—even tens of thousands—of dollars in rent," said Steve Guggenmos, vice president of Research and Modeling for Freddie Mac Multifamily. "Our research shows that while rent growth in restricted properties has been measured and predictable, market-rate rents have grown quickly and unevenly, because rental housing demand exceeds supply. It also illustrates the hardship faced by families who qualify for rent-restricted properties but cannot find a unit due to lack of supply—a reality that can cost an already-struggling family substantial sums of money."
The paper compares average market-rate rents with restricted rents for two-bedroom units in nine counties across the country, looking at four in-depth.