The U.S. Department of Housing and Urban Development’s (HUD’s) Office of Policy Development and Research has just released an update of the Low-Income Housing Tax Credit (LIHTC) Database to include LIHTC-financed projects placed in service from 1995 through 1998. The LIHTC Database is the only comprehensive source of information on the Federal Government’s largest subsidy program for the construction and rehabilitation of low-income rental housing. This article provides a brief synopsis of the LIHTC program, discusses some of the findings from the recently added data, and explains how the LIHTC Database can be accessed by the public.

Although HUD has almost no direct administrative responsibility for the LIHTC program, the LIHTC’s importance as a source of funding for low-income housing compels HUD to collect and provide to the public information on this program. The purpose of the LIHTC Database is to provide a complete list of LIHTC projects along with a set of basic data on each project. The database can be used in its entirety, or representative samples can be drawn for more indepth analysis. The database is available to the public and will be used by HUD; other Federal, State, and local government agencies; and academic and private-sector researchers.

Overview of the LIHTC

The LIHTC was created by the Tax Reform Act of 1986 as Section 42 of the Internal Revenue Code. The act eliminated a variety of tax provisions that had favored rental housing and replaced them with a program of credits to be issued for the production of rental housing targeted to lower income households. Under the LIHTC program, 58 State and local agencies are authorized (subject to an annual per capita limit) to issue Federal tax credits for the acquisition, rehabilitation, or construction of affordable rental housing. The credits can be used by property owners to reduce Federal income taxes and generally are taken by outside investors who contributed initial development funds for a project. To qualify for credits a project must have a specific proportion of its units set aside for lower income households, and the rents on these units are limited to a maximum of 30 percent of qualifying income.¹ The amount of the credit that can be provided for a project is a function of development cost (excluding land), the proportion of units that is set aside, and the credit rate (which varies based on development method and whether other Federal subsidies are used). Credits are provided for a period of 10 years.²

Congress initially authorized State agencies to allocate approximately $9 billion in credits over 3 years: 1987, 1988, and 1989.³ Subsequent legislation modified the credit to make technical corrections to the original act and to make substantive changes in the program.⁴ For example, the commitment period (during which qualifying units must be rented to low-income households) was extended from 15 to 30 years.⁵ States also were required to ensure that no more tax credit was allocated to a project than was necessary for financial viability. The LIHTC was made a permanent part of the Federal tax code in 1993, and, more recently, the per-capita allocation of credit authority of the States was increased from the original $1.25 per capita to $1.50 in 2001, $1.75 in 2002, and indexed to inflation thereafter.

Since 1987—the first year of the program—the LIHTC has become the principal Federal subsidy mechanism for supporting the production of new and rehabilitated rental housing for low-income households. However, the number of units actually developed is difficult to determine. Given the decentralized nature of the program, there is no single Federal source of information on tax credit production. Because the Internal Revenue Service (IRS) is prohibited by law from publishing any information that could be linked to individual taxpayers, IRS is not a potential source for compiling this information. Therefore, the data must be collected from
the 58 State and local agencies that administer the LIHTC. Most of the data about the early implementation of the program were compiled by the National Council of State Housing Agencies, an association of State housing finance agencies (the entities responsible for allocating tax credits in most States). Data on LIHTC projects placed in service through 1994 were made available in 1996 in the database that Abt Associates created for HUD and from the U.S. General Accounting Office (GAO) report on the program.⁶ The recent update makes available data on projects placed in service through 1998.⁷

Characteristics of Tax Credit Projects

HUD has added data to the LIHTC Database for 4,833 projects and 300,891 units placed in service between 1995 and 1998. Data for this time period were obtained from all 58 tax credit allocating agencies. The LIHTC Database contains information on:

• Project location, including address, State, county, place, census tract, and latitude and longitude geocodes.
  
  
• Contact information for project sponsors.
  
  
• Number of total units and credit-eligible units.
  
  
• Unit distribution by number of bedrooms.
  
  
• New construction/rehabilitation.
  
  
• Credit type (30- or 70-percent present value).
  
  
• For-profit/nonprofit sponsorship.
  
  
• Tax-exempt bond or Rural Housing Service Section 515 financing.
  
  
• Increased basis due to location in a Qualified Census Tract or Difficult Development Area.
  
  
• Year placed in service and year credits allocated.

Table 1 shows the rates of missing data for the variables in the database for projects placed in service between 1992 and 1998. The table indicates the percentage of projects and units missing the indicated data elements. For comparison purposes, the table is divided into two periods: one represents the best data from the earlier collection effort, the other represents the years included in the update. Thanks to the cooperation of the State and local agencies, data coverage in 1995 through 1998 is vastly improved over the 1992 to 1994 period.

Table 1. LIHTC Database: Rate of Missing Data by Variable, 1992–98 °Indicates only that some location was provided. Address may not be a complete street address. *Indicates presence of a mailing address.

Table 2 presents information on the basic characteristics of LIHTC properties by year placed in service. Placed-in-service projects are those that have received a certificate of occupancy and for which the State has submitted an IRS Form 8609 indicating that the property owner is eligible to claim LIHTCs.⁸

Table 2. Characteristics of LIHTC Projects, 1995–98 Notes: The analysis dataset includes 4,833 projects and 300,893 units placed in service between 1995 and 1998. The database contains missing data for qualifying ratio (1 percent) and bedroom count (17 percent). Data are partial for properties placed in service in 1998. Totals may not sum to 100 percent because of rounding.

On average, approximately 1,300 projects and 80,000 units were placed into service during each of the first 3 years of the update (those for which data are complete). The decrease in projects and units placed in service in 1998 shown in table 2 is a result of partial data for that year, as noted above. On average LIHTC projects placed in service during this period contained 62 units, with average size increasing over the period. More than one-third (36 percent) of LIHTC projects are larger than 50 units. By comparison, only 2 percent of all rental properties nationally have 50 or more units.⁹

Of the total units produced, the majority were qualifying units—that is, units reserved for low-income use, with restricted rents, and for which low-income tax credits can be claimed. Overall, 96 percent of total units placed in service from 1995 through 1998 were qualifying units. The distribution of qualifying ratios shows that the majority of projects (88 percent) are composed almost entirely of low-income units. Only a very small proportion of the properties have lower qualifying ratios, reflecting the minimum elections set by the program (for example, a minimum of 40 percent of the units at 60 percent of median income or 20 percent of the units at 50 percent of median income).

Table 2 also presents information on the size of the LIHTC units based on the number of bedrooms. As shown, on average the units had two bedrooms. Fully 24 percent of LIHTC units in the study period had three or more bedrooms, compared with only 11 percent of all multifamily rental units nationally and 16 percent of all rental units built from 1990
to 1997.¹⁰ Over the 4-year period, the distribution of units by bedroom count edged toward larger units; the percentage of one-bedroom units dropped from 31 to 25 percent, and the percentage of three-bedroom units increased from 19 to 25 percent.

Table 3 presents additional information on the characteristics of the LIHTC projects and units, beginning with the type of construction: new, rehabilitation, or a combination of new and rehabilitation (for multibuilding projects). As shown, LIHTC projects placed in service from 1995 through 1998 were predominately new construction, accounting for 65 percent of the projects and 63 percent of the units. Rehabilitation of an existing structure was used in 34 percent of the projects and 36 percent of the units, whereas a combination of new construction and rehabilitation was used in only a small fraction of LIHTC projects and units.¹¹

Table 3. Additional Characteristics of LIHTC Projects, 1995–98 (in percent) Notes: The analysis dataset includes 4,833 projects and 300,893 units placed in service between 1995 and 1998. The database contains missing data for construction type (1.9 percent), nonprofit sponsor (10.2 percent), RHS Section 515 (8.6 percent), bond financing (7.8 percent), and credit type (4.2 percent). Data are partial for properties placed in service in 1998. Totals may not sum to 100 percent because of rounding.

The LIHTC program requires that 10 percent of each State’s LIHTC dollar allocation be set aside for projects with nonprofit sponsors. As shown in table 3, overall, 28 percent of LIHTC projects placed in service from 1995 to 1998 had a nonprofit sponsor. The proportion of nonprofit-sponsored properties increased yearly during the period, from 19 percent of projects and 22 percent of units in 1995 to 35 percent of projects and 26 percent of units in 1998.

Table 3 also presents information about two common sources of additional subsidy: tax-exempt bonds (which generally are issued by the same agency that allocates the LIHTC) and Rural Housing Service (RHS)¹² Section 515 loans (which imply a different regulatory regime and different compliance monitoring rules). Overall, RHS Section 515 loans 7 Summary were used in approximately 17 percent of the projects and 8 percent of the units placed in service during the study period, with the proportion of RHS projects dropping steadily throughout the period. The drop in RHS projects is related to the dramatic decrease in funding for the Section 515 program over the study period. Funding fell from $540 million in 1994 to $220 million in 1995 and 1996 and to $153 million in 1997.¹³ At the same time, the proportion of projects with mortgages financed by tax-exempt bonds increased each year, with 7 percent of projects and 18 percent of units receiving bond-financed mortgages over the 4-year period. The increase in LIHTC projects that have mortgages financed with tax-exempt bonds is related to the high level of competition among projects for tax credits. Developers often must secure such mortgages to make their applications more competitive in the eyes of the allocating agency. In addition, properties with bond-financed mortgages may be eligible for tax credits outside the annual per-capita State allocation limits.

The final characteristic presented in table 3 is the credit type used by LIHTC projects. The 30-percent present value credit is used for acquisition or if other Federal financing is used for the rehabilitation or new construction, whereas the 70-percent present value credit is available to nonfederally financed rehabilitation or construction. Approximately twothirds of the LIHTC projects placed in service during the study period have a 70-percent credit, 22 percent have a 30-percent credit, and 10 percent have both.

Additional analysis of the data, including more comparisons with earlier data and a location analysis, are available in the report Updating the Low-Income Housing Tax Credit (LIHTC) Database, which can be purchased from HUD USER by calling 1–800–245–2691. The report is also available for download on the Internet at http://www.huduser.gov/datasets/lihtc/report9598.pdf.

Accessing the LIHTC Database

The release of data from 1995 through 1998 also marks the debut of a new interactive system for accessing the LIHTC Database. The interactive system allows users to:

• Select only the variables of interest.
  
  
• Retrieve data on all projects in a particular State or group of States.
  
  
• Restrict the search to projects with a particular characteristic or set of characteristics.
  
  
• Select only projects in a particular city.
  
  
• Select projects within a user-selected radius of the center of a city.

Users may also download the entire database. This new service is available at http://lihtc.huduser.gov.

Notes

1. Owners may elect to set aside at least 20 percent of the units for households at or below 50 percent ofarea median income or at least 40 percent of the units for households with incomes below 60 percent of area median income. Annual rents in low-income units are limited, at most, to 30 percent of the elected 50 or 60 percent of area median income.

2. The credit percentages are adjusted monthly but fall in the range of 4 to 9 percent of qualifying basis (that is, the proportion of the property devoted to low-income tenants). In general, credits are intended to provide a stream of benefits with a present value equal to either 30 percent (for the 4-percent credit) or 70 percent (for the 9-percent credit) of the proper-ty’s qualifying basis. The 30-percent credit is used for the acquisition of an existing building or for federally subsidized new construction or rehabilitation. The 70-percent credit is used for rehabilitation or construction of projects without additional Federal subsidies.

3. Assumes approximately $300 million in allocation authority in each year, with annual credits taken for 10 years.

4. See Technical and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, and Omnibus Reconciliation Act of 1990.

5. The Omnibus Reconciliation Act of 1989 extended the commitment period from 15 to 30 years. However, project owners are allowed to sell or convert the project to conventional market housing if they apply to the State tax credit allocation agency and the agency is unable to find a buyer (presumably a nonprofit) willing to maintain the project as low-income for the balance of the 30-year period. If no such buyer is found, tenants are protected with rental assistance for up to 3 years.

6. See “Development and Analysis of the National LIHTC Database,” Abt Associates, July 1996; and GAO’s “Tax Credits: Opportunities to Improve Oversight of the Low-Income Housing Program,” GAO/GGD RCED–97–55, March 1997.

7. A number of agencies provided incomplete data for properties placed in service in 1998. They reported that at the time of data collection, they did not yet have a final count of projects placed in service. These data will be collected during future rounds of data collection.

8. IRS reporting is on a building-by-building basis. However, in this study, we use the LIHTC project as a unit of analysis. A project could include multiple buildings and/or multiple phases that were part of a single financing package.

9. National Multi Housing Council, tabulation of unpublished data from the U.S. Census Bureau’s 1995–96 Property Owners and Managers Survey. Data do not include public housing projects.

10. U.S. Census Bureau, 1997 American Housing Survey. Data refer to vacant and occupied rental apartments in buildings with two or more units.

11. The combination of new construction and rehabilitation is possible in multibuilding properties in which one building was rehabilitated and one building was newly constructed.

12. The Rural Housing Service formerly was called the Farmers Home Administration.

13. RHS Section 515 funding information provided by the Housing Assistance Council on March 9, 2000.