Fair Housing Issues and the LIHTC Program

Fair Housing Issues and the LIHTC Program

The Office of Policy Development and Research (PD&R) recently hosted a panel discussion on the Low Income Housing Tax Credit Program (LIHTC) and how it relates to fair housing issues. LIHTC is the federal government’s largest current program for the production of affordable housing. Tax credits are distributed by State Housing Finance Agencies (HFAs) to developers for the construction or rehabilitation of affordable rental housing. PD&R’s panel brought together researchers and HFA officials to discuss some recent research and how it relates to the complex issues of administering the program and running annual competitions among developers.

Casey Dawkins, an associate professor of urban studies and planning at the University of Maryland, shared his research focusing on the location and characteristics of neighborhoods where the housing units are sited. Using data from HUD’s LIHTC database, Dawkins explored project clustering in different metropolitan areas using geographic information systems. The emphasis of the study was on the concentration of LIHTC units in high-poverty versus low-poverty areas. The research also considers the impact of the statutory requirement that projects located in Qualified Census Tracts (QCTs) can be provided deeper subsidies. Because QCTs by definition are higher poverty areas, this raises the issue of whether the statute unintentionally may incentivize placement of projects in these areas.¹

The report, Exploring the Spatial Distribution of Low Income Housing Tax Credit Properties, was conducted via PD&R’s Affordable Housing Research Cadre. As with any research, there are a number of limitations and caveats to bear in mind. For instance, the research did not distinguish between use of tax credits for new construction versus rehabilitation of existing affordable housing.

Expanding on the role federal policy can play in influencing housing and community development outcomes, Myron Orfield, executive director of the University of Minnesota’s Institute on Race and Poverty, described a missed opportunity to further fair housing in the Twin Cities region. Orfield contrasted the region’s success using project-based vouchers to create housing opportunities in low-poverty, desegregated neighborhoods with what he considers to be the relative failure to produce similar outcomes with the LIHTC program. As a result, most LIHTC housing units are in racially segregated low-income neighborhoods. Orfield cited the lack of clear regulatory guidance to create housing in desegregated, low-poverty neighborhoods as a primary cause for this outcome.

Mark Shelburne, counsel and policy director of the North Carolina Housing Finance Agency, presented his perspective from years of experience administering the LIHTC program at the state level. Shelburne stressed the important role the program has played in the rehabilitation of existing project-based affordable housing units and as a key financing source for other HUD programs and initiatives (such as HOPE VI). This application of LIHTC funds, said Shelburne, has contributed to the clustering of LIHTC projects that Dawkins’ research reveals. In addition, Shelburne highlighted the challenges of balancing place- and people-based investments and stressed the benefits accruing to low-income neighborhoods of using LIHTC tax credits to rehabilitate and preserve LIHTC properties in need of repair.

Although the panel provided evidence suggesting that LIHTC projects are typically located in low-income, urban neighborhoods, little is known about the degree to which these housing units contribute to neighborhood integration or segregation. Shelburne cited recent research that examined LIHTC tenant data in three cities and found the units placed in service did not increase neighborhood segregation.² PD&R is working on a major effort to upgrade the LIHTC database to include tenant data that will allow for more research into the program’s effect on neighborhood segregation.

The panel discussion provided a thought-provoking overview of siting of affordable housing through the LIHTC program and the tradeoffs sometimes associated with allocating the scarce federal resources.

Click here to watch the Quarterly Briefing and Research Update. (Hit the “Forward” button until you find the video for the “Quarterly Housing Market Update 3/22/2012”)