Where Are LIHTC Units Most Scarce? MPF Research Examines Metro-Level Availability

The low-income housing tax credit (LIHTC) is one of the most popular and widely used programs to develop housing for income-burdened households. Despite its wide use, however, a large disparity exists between the number of LIHTC units and the number of low-income households at the national level. According to the National Low Income Housing Coalition, there are approximately 11.4 million households that fall under the low-income definition. A low-income household is one whose annual income is 30% of the metro area’s median or less. Since its inception in 1986, the National Association of Homebuilders estimates 2.7 million rental units have been developed leveraging financing through the LIHTC.

In certain metro areas, the disparity is even larger. Aggregating property-level data from the National Housing Preservation Database and pairing it with MPF Research and U.S. Census Bureau data, we estimate where the greatest mismatches exist between estimated low-income households and LIHTC units.

Phoenix Leads the Nation in Scarcity of LIHTC Units

We highlight where LIHTC units are most scarce and pair this data with population estimates of household counts were median area income falls below 30% area median income (AMI). From a methodology perspective, we included properties that could also receive funding by other affordable programs such as other project-based programs, need-based programs or community block grants. Looking at the MPF Research top 50 apartment markets, there are an estimated 12.3 units for every 100 low-income households.

LIHTC Apartment Data

By metro, Phoenix ranked the lowest out of the MPF Research top 50 apartment markets for the number of units funded by LIHTC available for every 100 low-income households, at 6.08 LIHTC units per 100 low-income households. In Phoenix, we estimate 16.4% of households fall under the low-income definition with household income of roughly $16,500. While these units remain in the affordable housing inventory, the tax credit remains for 15 years, during which time the property must adhere to affordable compliance standards. Looking at Phoenix, we estimate 41.3% of these units are expected to expire between 2017 and 2020, so a large portion of already scarce units are at risk of falling out of the affordable inventory. All told, we estimate that LIHTC units account for 4.7% of the entire rental housing stock in the metro.

LIHTC Units Are Least Scarce in Richmond

Conversely, the table below illustrates where LIHTC units are more prevalent. However, in each metro, designated affordable housing units still fall well short of the needed volume. Richmond, Virginia rounds out the MPF Research top 50 major markets with 22 LIHTC units for every 100 low-income households. Within Richmond, 30% of area median income translates to approximately $17,400. Moreover, while there are more LIHTC units available, the pool of units developed using the LIHTC is greater relative to the broader existing unit count. Of the selection below, Sacramento (25%), Kansas City (22%) and Atlanta (21%) report a greater share of households that are identified as low-income. Among the top 50 markets, the average share of households that fall under this low-income definition is estimated to be 16.7%.

LIHTC Apartment Research

Why Do Such Disparities Exist?

Looking at the both lists, no clear trends emerge that indicate why designated affordable housing is more scarce is some areas than in others. LIHTCs are allocated from a federal level to state housing finance authorities, then flow to the municipal level for local development or redevelopment. According to an estimate from the National Council of State Housing Agencies (NCSHA), in fiscal year 2016, the LIHTC program costs $7.88 billion and the volume of low-income tax credit allocated is capped and determined by state population. For some context, that dollar volume is less than 3% of all federal housing expenditures (affordable or conventional). The NCSHA is the nonprofit organization for state housing authorities to align around tax credit strategies and resource management for other affordable programs.

Regardless of ranking by metro, our results corroborate the overarching narrative of a drastic undersupply of affordable housing – specifically affordable housing funded by LIHTC. In no market in the broader MPF Research core 100 markets do affordable units funded by LIHTC meet the number of low-income households. Considering these tax credits are allocated from a state to local level, there are few unique, apparent trends between them, save for the positive relationship between LIHTC units and the greater number of state and metro populations.  From a practical perspective, not every low-income household matches the number of affordable units in a given area. Nonetheless, it illustrates the magnitude of how undersupplied the affordable market is with the number of units in affordable inventory.