Tax Credits for Affordable Housing Dry Up

And another limit to market-driven affordable housing production is revealed:

"Mr. Brandt’s experience is being mirrored throughout the nation, demonstrating the shortcomings of a financing vehicle that was conceived more than two decades ago to inject market discipline into the development of income-restricted housing. The theory was that investors would support only those projects likely to be successful.

Many developers are finding themselves either unable to sell tax credits that they have been awarded or short millions of dollars because the price that investors are willing to pay for a tax credit has tumbled from $1 or more to less than 75 cents today.

Today, the total amount of tax credit equity available for low-income housing has shrunk to $4 billion to $4.5 billion, down from about $9 billion in 2007, Frederick H. Copeman, the national director of tax credit investment advisory services at Ernst & Young, said in an interview in his Boston office."

Despite our frequent hand-wrangling over that eyesore public housing, in reality the majority of subsidized housing today is tax-credit financed and produced by private sector developers, for- and non-profit.  Yet, the limits to this approach fuel calls for state and federal affordable housing trust funds, to again prioritize the needs of the lowest-income Americans that public housing filled starting in the 1960s.

The Low-Income Housing Tax Credit, a product of the Reagan-era Tax Reform Act of 1986 (which decreased taxes for the rich and raised them for the poor), has been behind "nearly 90% of all affordable housing produced today."  Although it's terrific that we have found such an effective vehicle for housing production, another harsh reality is that these units on average are much less affordable for the lowest-income Americans - compared to public housing, for instance.  And the reason I'm making that comparison is because so many mixed-income replacements of public housing rely on LIHTC deals, which ultimately reduce the overall number of deeply subsidized units.  Basically, by relying on the market, we've once again abdicated our responsibility to the poorest among us, and further increased inequality in housing markets.

This is why so many housing advocates are pushing for state and federal affordable housing trust funds, so that the housing needs of the very poor will not be subject to the vagaries of the market.  We have an overall shortage of "affordable housing" in the U.S. - even beyond the subsidized definition, too many of us are paying too much for our rental units or the houses we own - and the hardship, unsurprisingly, is greatest at the bottom of the economic ladder.  The shrinking of the tax credit market just made a bad situation that much worse.

(Photos, in order of appearance, by Rachael Voorhees, by Payton Chung - a likely tax credit deal; and Noemie Maxwell, of the mourning of the loss of 162 units of affordable housing in Washington State.)