HUD Study Finds Majority of Housing Credit Developments Remain Affordable Post Year 15

According to a recent study HUD commissioned to find out what happens to Housing Credit developments that reach the end of their initial 15 year compliance period, the vast majority continue to function in much the same way they always have, providing affordable housing of the same quality at the same rent levels to essentially the same populations, without major recapitalization. A moderate number of properties are recapitalized as affordable housing with a major new source of public subsidy and the smallest group of properties is repositioned as market-rate housing and ceases to operate as affordable.

The study, What Happens to Low-Income Housing Tax Credit Properties at Year 15 and Beyond, is based on quantitative data from HUD’s Housing Credit database of properties and units placed in service each year and on qualitative data from interviews with syndicators, investors, owners, and state Housing Finance Agencies (HFAs).

While researchers posited a worst case scenario that more than one million Housing Credit units could leave the affordable housing stock by 2020, they concluded that such an outcome is highly unlikely, “our answer to the question of whether older Housing Credit properties continue to provide affordable housing for low-income renters is a qualified ‘yes’.”

The study distinguishes between older developments financed from 1987 through 1994 and newer developments financed from 1995 through 2009 finding that while an increasing number of later developments are in low poverty census tracts, 30 percent compared to 25 percent for older developments, they are also at greater risk of leaving the program at Year 15 because they are situated in locations that can command rents in excess of those available under the Housing Credit program.

The study’s researchers set forth a series of policy recommendations for HFAs to consider as developments age and states determine how best to allocate scarce resources to preserving older properties. Recommendations include placing the highest priority on developments that: are most likely to be repositioned in the market as higher rent housing; serve special-needs populations; commit to renting units well below the Housing Credit maximums; and that are in neighborhoods where concerted revitalization efforts are underway.