What Should Be the Future of the Low-Income Housing Tax Credit Program?

ABSTRACT

This research examines the Low-Income Housing Tax Credit (LIHTC) developments in metropolitan areas nationwide. The results indicate that the LIHTC program contributes to the spatial concentration of poverty as well as of racial and ethnic minorities. The program is not promoting mixed-income housing. The program is serving an income category with very little need for additional units and is not serving those with a need. Finally, the program is increasing the rental housing stock in soft markets and failing to increase the supply in tight ones. It is recommended that states adopt allocation standards that would deconcentrate poverty and affirmatively further fair housing. The benefits of the program should be reconfigured to promote mixed-income housing. The LIHTC program should permit states to exchange tax-credit authority for vouchers, to better serve the poorest households. The program should exercise greater rigor in market analysis so that new units are added only in tight markets and deteriorated units are rehabilitated elsewhere.

KEYWORDS:

• Development/revitalization
• low-income housing
• rental housing
• tax credit
• vacancy rates

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. For each tract, the value of the five indicator variables were converted to z scores and then summed. The tracts were rank ordered and divided into quintiles with the lowest category indicating the lowest level of neighborhood distress.

2. If a renter household has an income of $20,000, they can afford a gross rent of no more than $500 per month if the household is to spend no more than 30% of income on housing.

Additional information

Notes on contributors

Kirk McClure

Kirk McClure is a professor in the Urban Planning Program at the University of Kansas.  His primary area of research is affordable housing and his focus is on evaluation of the performance of federal assisted housing programs.