Physical Environment Air & Water Quality Housing & Transit Search Policies & Programs

hints
Display All Policies & Programs

Low Income Housing Tax Credits (LIHTCs)

Health Factors: Housing & Transit
Decision Makers: Community Development Professionals Employers & Businesses Local Government State Government
Evidence Rating: Some Evidence
Population Reach: 50-99% of WI's population
Impact on Disparities: Likely to decrease disparities

Is this program or policy in use in your community? Tell us about it.

Description

Low Income Housing Tax Credits (LIHTCs) provide a federal tax credit equal to a large percentage of the cost incurred for developing or rehabilitating low income units in rental housing development (US HUD-LIHTC). States distribute LIHTC funds through Qualified Allocation Plans (QAPs), competitive processes that prioritize projects that will serve the lowest income families and remain affordable for the longest period of time (Ellen 2015). Units must remain affordable for 30 years and have pre-determined rent ceilings and rental rates that do not increase with growth in tenants' incomes (US HUD-Khadduri 2012); most LIHTC developments include only rent-restricted units (Ellen 2009). Maximum rental rates are federally mandated, although states may select lower rates (O'Regan 2013). Residents of LIHTC-funded units often receive other forms of housing support (NBER-Collinson 2015, O'Regan 2013). 

Expected Beneficial Outcomes

Increased access to affordable housing
Increased access to quality housing
Reduced crime
Increased neighborhood socio-economic diversity
Reduced blight

Evidence of Effectiveness

There is some evidence that Low Income Housing Tax Credits (LIHTCs) increase access to quality, affordable housing for low and moderate income families (Baum-Snow 2009, Deng 2011a, Deng 2007) without negative effects on neighboring communities or property values (Deng 2011b, Edmiston 2011, Edmiston 2015, UW CULER-Green 2002, Freedman 2015). LIHTCs are also a suggested strategy to minimize the displacement of low income residents that can follow neighborhood improvements such as new affordable housing options (Damewood 2011). Additional evidence is needed to confirm effects and understand the characteristic of successful LIHTC efforts. 

Small new construction (Jackson 2015, Edmiston 2015) and larger rehabilitation projects (Edmiston 2015) appear to modestly improve neighborhood quality. LIHTCs in high poverty areas are likely to generate greater benefits than LIHTCs in middle (Deng 2011a) or high income neighborhoods (Diamond 2016). LIHTC developments in high poverty neighborhoods can reduce violent crime rates (Diamond 2016, Freedman 2011) and may also help eliminate dilapidated buildings, vacant lots, and other forms of blight (Woo 2016). A study of LIHTC-supported housing rehabilitation in Texas suggests that LIHTCs in low income neighborhoods can increase students’ academic achievement (Di 2013). LIHTC developments in higher income areas may reduce property crime and do not appear to increase crime overall (Diamond 2016). 

LIHTCs have not been shown to displace new construction when credits are invested in stable or declining areas (Baum-Snow 2009). Property values of nearby houses have remained stable, and in some cases, appreciated more rapidly than neighboring areas with the establishment of LIHTC sites (Freedman 2015, Deng 2011b, UW CULER-Green 2002). LIHTC developments can also positively influence nearby property upkeep (Edmiston 2015). A Polk County, IA-based study suggests that careful site planning and design as well as efforts to attract tenants with various income levels may avoid any potential negative consequences for nearby property values (Funderburg 2010). LIHTCs may displace new construction in gentrifying neighborhoods (Baum-Snow 2009, Freedman 2015).

Overall, LIHTC use is associated with declines in racial segregation at the metropolitan level in low (Horn 2011) and high poverty neighborhoods (Horn 2011, Diamond 2016). Neighborhoods with LIHTC-funded units may have more low income households than surrounding neighborhoods, perhaps because income-eligible families move to pursue LIHTC-supported housing (Freedman 2015).

Some experts suggest that LIHTCs could be adjusted to better benefit households with the lowest incomes (Desai 2010, Leviner 2004); flat rate rents may still be unaffordable for many low income households (NBER-Collinson 2015). An examination of LIHTC tenants in 18 states indicates that approximately half of all LIHTC units are occupied by households with incomes below 30% of the area median (O'Regan 2013).

Implementation

United States

LIHTCs are available in all 50 states, Washington DC, and Puerto Rico. The federal government allocates roughly $6 billion per year to support LIHTCs; the total annual housing tax credit allocation to each state is limited to $2.25 per resident, adjusted for inflation (NBER-Collinson 2015). This funding has produced over 2.6 million units of affordable rental housing between 1986 and 2013 (LISC-Tax credits 2013).

States utilize Qualified Allocation Plans (QAPs) to distribute LIHTC funds; Novogradac compiles state QAPs annually on its website (Novogradac AHRC-LIHTC Map).

Wisconsin

LIHTCs are awarded through the Wisconsin Housing and Economic Development Authority (WHEDA) (WHEDA-LIHTCs).

Implementation Resources

AHIC - Affordable Housing Investors Council (AHIC). Investing in affordable housing through federal low-income housing tax credits (LIHTC). Accessed on October 19, 2016
AHTCC - The Affordable Housing Tax Credit Coalition (AHTCC). The housing credit: Transforming lives, strengthening communities, creating jobs. Accessed on October 19, 2016
ChangeLab-Housing toolkit 2015 - ChangeLab Solutions. Preserving, protecting, and expanding affordable housing: A policy toolkit for public health. 2015. Accessed on August 4, 2017
NLIHC - National Low Income Housing Coalition (NLIHC). Dedicated to socially just public policy for affordable and decent homes. Accessed on October 20, 2016
US HUD-LIHTC database - US Department of Housing and Urban Development (US HUD). Low income housing tax credits: About the LIHTC database. Accessed on February 27, 2017
US Treasury-LIHTC - US Department of the Treasury (US Treasury). Office of the Comptroller of the Currency. Low-Income Housing Tax Credit Program (LIHTC). Accessed on February 27, 2017

Citations - Description

Ellen 2009 - Ellen IG, O’Regan KM, Voicu I. Housing Markets and the Economy: Risk, Regulation, and Policy, Chapter 8: Siting, Spillovers, and Segregation: A Reexamination of the Low-Income Housing Tax Credit Program. In: Glaeser E, Quigley J, eds. Housing Markets and the Economy: Risk, Regulation, and Policy. Lincoln Institute of Land Policy; 2009:203-267. Accessed on October 20, 2016
Ellen 2015 - Ellen IG, Horn K, Kuai Y, Pazuniak R, Wiliams MD. Effect of QAP incentives on the location of LIHTC properties: Multi-disciplinary research team report. Washington, DC: US Department of Housing and Urban Development (US HUD), Office of Policy Development and Research (PD&R); 2015. Accessed on October 19, 2016
NBER-Collinson 2015 - Collinson R, Ellen IG, Ludwig J. Low-income housing policy. The National Bureau of Economic Research (NBER). 2015: Working Paper 21071. Accessed on October 12, 2016
O'Regan 2013* - O'Regan KM, Horn KM. What can we learn about the Low-Income Housing Tax Credit program by looking at the tenants? Housing Policy Debate. 2013;23(3):597-613. Accessed on October 12, 2016
US HUD-Khadduri 2012 - Khadduri J. What happens to low income housing tax credit properties at year 15 and beyond? Abt Associates, Inc. for US Department of Housing and Urban Development (HUD). Accessed on February 23, 2017
US HUD-LIHTC - US Department of Housing and Urban Development (US HUD), HUD Exchange. Low Income Housing Tax Credit (LIHTC) summary. Accessed on February 27, 2017

Citations - Evidence

Baum-Snow 2009* - Baum-Snow N, Marion J. The effects of low income housing tax credit developments on neighborhoods. Journal of Public Economics. 2009;93(5-6):654-66. Accessed on October 12, 2016
Damewood 2011 - Damewood R, Young-Laing B. Strategies to prevent displacement of residents and businesses in Pittsburgh's Hill District. September 2011. Accessed on October 12, 2016
Deng 2007* - Deng L. Comparing the effects of housing vouchers and low-income housing tax credits on neighborhood integration and school quality. Journal of Planning Education and Research. 2007;27(1):20–35. Accessed on October 12, 2016
Deng 2011a* - Deng L. Low-income housing tax credit developments and neighborhood change: A case study of Miami-Dade County. Housing Studies. 2011;26(6):867-95. Accessed on October 12, 2016
Deng 2011b* - Deng L. The external neighborhood effects of low-income housing tax credit projects built by three sectors. Journal of Urban Affairs. 2011;33(2):143-66. Accessed on October 12, 2016
Desai 2010 - Desai M, Dharmapala D, Singhal M. Tax incentives for affordable housing: The low income housing tax credit. Tax Policy and the Economy. 2010;24(1):181–205. Accessed on October 12, 2016
Di 2013* - Di W, Murdoch JC. The impact of the low income housing tax credit program on local schools. Journal of Housing Economics. 2013;22(4):308-320. Accessed on October 12, 2016
Diamond 2016 - Diamond R, McQuade T. Who wants affordable housing in their backyard? An equilibrium analysis of low income property development. National Bureau of Economic Research (NBER). 2016: Working Paper 22204. Accessed on October 19, 2016
Edmiston 2011 - Edmiston KD. Low-income housing tax credit developments and neighborhood property conditions. Kansas City: Federal Reserve Bank of Kansas City Economic Research Department (FRBKC). 2011;(December):RWP 11–10. Accessed on October 12, 2016
Edmiston 2015 - Edmiston KD. Low-income housing tax credit developments and neighborhood property conditions. Social Science Research Network. 2015. Accessed on October 12, 2016
Freedman 2011* - Freedman M, Owens EG. Low-income housing development and crime. Journal of Urban Economics. 2011;70(2-3):115–31. Accessed on October 12, 2016
Freedman 2015* - Freedman M, McGavock T. Low-income housing development, poverty concentration, and neighborhood inequality. Journal of Policy Analysis and Management. 2015;34(4):805-834. Accessed on October 12, 2016
Funderburg 2010* - Funderburg R, MacDonald H. Neighbourhood valuation effects from new construction of low-income housing tax credit projects in Iowa: A natural experiment. Urban Studies. 2010;47(8):1745–71. Accessed on October 12, 2016
Horn 2011 - Horn KM, O’Regan KM. The low income housing tax credit and racial segregation. Housing Policy Debate. 2011;21(3):443–73. Accessed on October 12, 2016
Jackson 2015 - Jackson O, Kawano L. Do increases in subsidized housing reduce the incidence of homelessness? Evidence from the Low-Income Housing Tax Credit. Federal Reserve Bank of Boston. 2015: Working Paper No. 15-11. Accessed on October 19, 2016
Leviner 2004 - Leviner S. Affordable housing and the role of the Low Income Housing Tax Credit Program: A contemporary assessment. Tax Lawyer. 2004;57(4):869-904. Accessed on October 12, 2016
NBER-Collinson 2015 - Collinson R, Ellen IG, Ludwig J. Low-income housing policy. The National Bureau of Economic Research (NBER). 2015: Working Paper 21071. Accessed on October 12, 2016
O'Regan 2013* - O'Regan KM, Horn KM. What can we learn about the Low-Income Housing Tax Credit program by looking at the tenants? Housing Policy Debate. 2013;23(3):597-613. Accessed on October 12, 2016
UW CULER-Green 2002 - Green RK, Malpezzi S, Seah KY. Low Income Housing Tax Credit housing developments and property values. Madison: Center for Urban Land Economics Research (CULER), University of Wisconsin–Madison; 2002. Accessed on October 12, 2016
Woo 2016* - Woo A, Joh K, Van Zandt S. Impacts of Low-Income Housing Tax Credit program on neighborhood housing turnover. Urban Affairs Review. 2016;52(2):247-279. Accessed on October 12, 2016

Citations - Implementation

LISC-Tax credits 2013 - The Local Initiatives Support Cooperation (LISC). Policy brief: Community recovery through tax credits. 2013. Accessed on October 12, 2016
NBER-Collinson 2015 - Collinson R, Ellen IG, Ludwig J. Low-income housing policy. The National Bureau of Economic Research (NBER). 2015: Working Paper 21071. Accessed on October 12, 2016
Novogradac AHRC-LIHTC Map - Novogradac Affordable Housing Resource Center (AHRC). Resources: LIHTC mapping tool. Accessed on October 12, 2016
WHEDA-LIHTCs - Wisconsin Housing and Economic Development Authority (WHEDA). Low-income housing tax credits. Accessed on October 12, 2016

Page Last Updated

October 20, 2016

* Journal subscription may be required for access.