Page 18 - Balancing Priorities

BALANCING PRIORITIES: Preservation and Neighborhood Opportunity in the Low-Income Housing Tax Credit Program Beyond Year 30 potentially results in housing instability and disinvestment, while a decision to preserve such housing potentially reinforces patterns of segregation and limits access to higher opportunity neighborhoods. Neither outcome is desirable. A Broader Vision for the Housing Safety Net Fortunately, the tension between preservation and mobility stems more from a scarcity of resources and a failure to provide low-income renters with residential choices rather than an inherent policy con ict (Turner, 2017; Crowley and Pelletiere, 2012). Theoretically, given suf cient resources, all LIHTC properties could be preserved and an adequate supply of new units could be developed to allow low-income tenants their choice of neighborhood in which to live. It is doubtful, however, that suf cient resources will soon become available to expand production subsidies to this extent and such an approach would likely be inef cient, and still require additional rental assistance to reach the lowest income households. Rather, Year 30 in the LIHTC program highlights both a need and an opportunity to expand and rebalance affordable housing production and rental assistance subsidies to create a more ef cient federal affordable housing policy that is responsive to the concerns associated with both preservation and mobility. Moving toward such a policy could begin with changes to the LIHTC program. In the immediate future, the bipartisan Affordable Housing Credit Improvement Act of 2017 (S. 548) includes important changes, including a 50% increase in LIHTC allocations for the creation and preservation of affordable housing, a 50% basis boost for developments that set aside at least 20% of units for extremely low-income households, and a provision designating Native American communities as DDAs. These changes on their own, however, are insuf cient to resolve the dilemma between mobility and preservation. Tax credits could be targeted to areas and populations where supply-side interventions will yield the greatest bene ts. With regard to preservation efforts, 9% tax credits could be targeted through state QAPs toward at- risk units in neighborhoods ranked high or very-high for desirability and opportunity, and toward at-risk units that need investment in neighborhoods with very-low desirability, especially units in properties providing onsite services (e.g. permanent supportive housing), serving populations that have less success with vouchers, or contributing to a concerted community revitalization effort. LIHTC units reaching Year 30 in neighborhoods of lower desirability, but higher opportunity would be particularly worth preserving. Most other LIHTC housing would likely continue to operate as affordable housing even without affordability restrictions in place. Nine percent tax credits could also be targeted towards preserving housing in gentrifying neighborhoods. New LIHTC production could be directed towards higher opportunity neighborhoods in tighter markets where supply is unresponsive to increased demand. The allocation of federal low-income housing tax credits to the states could be determined by each state’s unmet housing needs and variations in development costs rather than each state receiving the same per capita credit. This strategy could increase the supply of units available to voucher holders in tighter markets and help housing providers meet the higher costs of developing in these areas. Meanwhile, incentives to develop in QCTs could be replaced by incentives to develop in areas with unmet housing needs and a need for production subsidies. While the public-private nature of the tax credit program allows developers to leverage signi cant capital from the private sector, consideration should be given to requiring mission-driven non-pro ts to be part of LIHTC property ownership structures. Non- NATIONAL LOW INCOME HOUSING COALITION AND THE PUBLIC AND AFFORDABLE HOUSING RESEARCH CORPORATION 18