Give the LIHTC the Credit It Deserves
By Bill Kelly
This month marks the 27th anniversary of the federal Low Income Housing Tax Credit (LIHTC) program. Throughout the program’s tenure, what lessons have we learned? What key components continue to make it a successful program?
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The Low Income Housing Tax Credit has been an outstanding success. We have learned that its mix of affordable housing requirements and private investor discipline is a model for public/private partnerships. Delivering the credit through state housing agencies has sharply increased the capacity of those agencies, who now also have the capability to run state programs and to take on new responsibilities for federal programs.
Over these 27 years, we have also learned that the credit is adaptable. For example, it long ago became the key tool to recapitalize and preserve the HUD-assisted portfolio, especially in markets where new construction makes no economic sense. Although the great recession damaged the market for the credit, the market rebounded smartly when the crisis had passed. Today, the credit is becoming an important capital source for properties with services for special needs populations, a role made especially important as affordable housing with services becomes a more significant strategy for meeting the long-term care needs of frail low-income seniors and people with serious disabilities.
At the same time, we should be clear what the credit generally does not do or does not do well. In most cases, it does not provide enough support to meet the needs of the very poor, including those who cannot afford rents that cover operating costs much less pay debt service. Rental subsidies are essential for the poorest Americans and can readily be used with the credit. And, even though it has a role in raising capital for housing that serves special needs populations, the credit cannot in most cases fund the services needed by those residents. It is incumbent on affordable housing providers in the wake of the Affordable Care Act to work with health care payors as partners to fund the services that enable residents to stay out of institutional care.
The very success of the program has spawned other challenges. Demand in most states far exceeds supply. As section 202 housing for the elderly and public housing programs are modified to reduce capital outlays in favor of LIHTC financing, they are only adding to the demand and causing other needs to be unmet. It is time, as the Commission has recommended, to increase the credit cap sharply.
Bill Kelly is the co-founder of Stewards of Affordable Housing for the Future.
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