Comment on Kirk McClure's “Are low-income housing tax credit developments locating where there is a shortage of affordable units?”

Abstract

Kirk McClure's article makes important contributions to our understanding of the way in which state allocating agencies are using the Low-Income Housing Tax Credit (LIHTC). However, one of the premises of his analysis – that allocating agencies should encourage the location housing developments in census tracts with a “surplus” of low-income renters – is mistaken. Census tracts are too small to be considered closed-system housing markets. Additionally, the LIHTC program does not exist in isolation, but instead as part of a combined national rental housing policy that includes both supply-side programs (LIHTC) and demand-side programs (housing vouchers). A final flaw in the notion that LIHTC units should be built in census tracts with a surplus of renter households in the 30% to 60% of AMI range compared with the units affordable to them is that increasing the amount of affordable housing in those tracts could have the effect of further concentrating households by income and race.

Keywords:

• low-income housing
• tax credit
• rental housing
• affordability

Acknowledgment

The author would like to thank her colleague Larry Buron for an insightful review of this comment.

Notes

¹This analysis also supports criticisms of the per capita federal allocations of LIHTC. Because these allocations do not take shortages or other needs factors into account, they encourage the use of LIHTC in the areas of surplus that predominate in some states.

²Revitalizing neighborhoods is a hard test to meet. So far, only in New York City has it been demonstrated that the development of subsidized rental housing has a positive effect on nearby house values. See Ellen 2008.

³For example, Newman and Schnare 1997; Mills et al. 2007.

⁴McClure attempts to address this point in his footnote 5, arguing that a surplus at a tract level shows that there is no need for LIHTC units there. I agree, but my point is that a shortage at a tract level does not demonstrate that there is a need for LIHTC units there.

⁵Alternatively, that household with an income between 30% and 60% of AMI could be occupying a “bargain” unit, at a rent level below 30% of 30% of AMI, and a household at a still lower income level occupying a unit in the 30%–60% of AMI “affordable” range and experience an even greater housing cost burden that could be alleviated with a voucher.