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Number of Low Income Housing Tax Credit Units Increased Between 1995 and 2002

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The number of units produced using tax credits for new
and rehabilitated rental housing for low-income people is
steadily growing, according to a recently issued analysis
of the federal Low Income Housing Tax Credit (LIHTC)
program; the nation's principal effort to encourage
production of this housing type. Between 1995 and 2002,
the annual production of LIHTC-eligible housing averaged
90,000 units, up from 56,000 units from 1992 through
1994, the preceding study period. The number of projects
remained about the same, however, reflecting an increase
in average project size from 42.1 to 77.7 units.

These and other trends are reported in a new study,
Updating the Low Income Housing Tax Credit (LIHTC)
Database: Projects Placed in Service Through 2002,
published by the U.S. Department of Housing and Urban
Development. The full text of the study is available as a
free download at
https://www.huduser.gov/portal/publications/HSGFIN/UpdateLIHTC.html

The LIHTC program, created by the Tax Reform Act of 1986,
replaced tax provisions favoring rental housing with
federal tax credits issued to the states, which in turn
allocate them to developers of low-income rental housing.
Developers can use the credits to offset taxes on other
income, and often sell the tax credits to outside
investors to finance the projects. To qualify for the
LIHTC, a project must set aside a portion of its units
for low-income households, which pay rent limited to
about 30 percent of their income.

The study shows that nearly two-thirds of the LIHTC units
placed into service from 1995 to 2002 were newly
constructed, almost half were located in central cities,
and nearly two-fifths in suburbs - a distribution similar
to that found in the overall distribution of rental
units. Nearly one-fourth of the units had three or more
bedrooms, compared with 17 percent of all apartments
built during that period.

Almost one-third of the projects had a nonprofit sponsor,
a proportion that rose over the study period. The
projects tended to be located in areas with relatively
low development costs or high development costs relative
to incomes. More than 40 percent of the projects'
residents received tenant-based rental subsidies through
the Housing Choice Voucher Program.

HUD maintains data on the program because of its national
importance for meeting the housing needs of low-income
individuals. The new HUD report represents the fifth
update to its LIHTC database, which was designed by Abt
Associates, and now includes LIHTC projects developed
from 1987 to 2002.

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