How Can the LIHTC Program Most Effectively Be Used to Provide Affordable Rental Housing near Transit

AbstractFor millions of Americans, public transportation is more than a mere convenience; it is a necessity for accessing jobs, educational opportunities, healthcare services, and other everyday needs, while living within their financial means. It can be significantly difficult, however, to finance the construction or preservation of affordable housing in location-efficient areas: high demand to live in transit-accessible areas drives up land costs, making it a challenge to acquire desirable sites for affordable housing and putting existing affordable rental housing at risk (Armstrong, 1994; Cervero and Duncan, 2002a, 2002b; Debrezion, Pels, and Rietveld, 2007; Gruen, Gruen & Associates, 1997; Immergluck, 2007; Lin, 2002). As the largest affordable rental housing production and preservation program in the nation, the Low-Income Housing Tax Credit (LIHTC) Program provides an opportunity to ensure that housing affordable to low- and moderate-income families is developed and preserved near public transportation. Yet, nearly 30 years after its enactment, the LIHTC Program remains one of the least studied federal programs. This article addresses a fundamental question: How can the LIHTC Program most effectively be used to promote the preservation and development of affordable rental housing near transit? To answer this question, this study relies on qualitative analysis of interviews of more than 100 housing policy agency staff, developers, and housing and transit policy experts and on a quantitative analysis of more than 400 qualified allocation plans issued during an 8-year period.IntroductionProviding affordable reniai homes near quality public transit ensures that low-income households are able to fit both housing and transportation expenses into their budget. Studies show that lowincome households who live in autodependent neighborhoods can spend as much as 25 percent or more of their income on transportation costs (CTOD, 2009). In contrast, families who live in neighborhoods with quality public transit options, on average, spend only 9 percent of their income on transportation costs (CTOD, 2009). All too often, low-income households are shut out of such neighborhoods because they are unable to afford the high housing costs that come with living in locations that are convenient to transit and other amenities. As a result, many households face a difficult tradeoff, unaffordable housing or budget squeezing transportation costs (JCHS, 2010). 'The Low-Income Housing Tax Credit (LIHTC) Program2 is a unique resource to create and preserve affordable homes near transit (exhibit 1). The LIHTC Program has been the primary source of funding for building new or preserving existing affordable housing since 1986 (JCHS, 2013). State housing agencies have the discretion to determine which developments receive funding and can target resources to address pressing local housing needs, such as providing or maintaining affordable rental housing near transit. Section 42 of the Internal Revenue Code requires each housing credit agency to set forth selection criteria in a qualified allocation plan (QAP). Although the code states that the QAP must give preference to "developments serving the lowest income tenants," "developments obligated to serve qualified tenants for the longest periods," and "developments located in a Qualified Census Tract3 and the development of which contributes to a concerted community revitalization plan," state housing agencies are granted the authority to otherwise allocate their credits based on their own set of criteria. Housing agencies generally use three mechanisms in their QAP to guide allocation decisions based on state and local housing needs: (I) threshold requirements,4 (2) set-asides,3 and (3) preferences.6The report from which this article is drawn addresses a fundamental question: How can the LIHTC Program most effectively be used to promote the preservation and development of affordable rental housing near transit? …