Everything you wanted to know about LIHTC

Presentation

1. Everything You Wanted to Know About LIHTC But Were Afraid to Ask Roger Valdez Office of Equity and Inclusion April 2024

2. Has the Low Income Housing Tax Credit made housing more affordable?

3. According to Joint Center for Housing Studies, during roughly the same period, cost burdened households have increased from 15 million to 45 million, an increase of 30 percent.

4. “What's driving Utah’s housing affordability crisis?” Fox News, January 20,2024 “ Dejan Eskic , Senior Research Fellow for Housing, Construction, and Real Estate at the Kem C. Gardner Institute at the University of Utah said . . . 15 percent of Utah renters are now paying 50% of their income to housing. “So the more burdened your population becomes the less they have an opportunity to spend money elsewhere. So this is why this is a big challenge for us," said Eskic . Cost Burden in Utah

5. If cost burden is the measure of affordability, then LIHTC has not been effective.

6. Cost burden is a dubious measurement but… . . . nationally and locally, in spite of significant increases in LIHTC spending, housing cost burden has gotten worse, not better. By their own measures, LIHTC has been a total failure if the objective has been to ease cost burden. If this is a false correlation (i.e., market rates are not affected by LIHTC spending), then LIHTC advocates should stop using cost burden tallies as the basis for arguing for more spending on LIHTC. The truth is there is no relationship between LIHTC spending and price; price is determined by supply and demand, not subsidies

7. Hiland Plaza Project on Nob Hill 9 Percent $19.2 million 92 units, 78 affordable 3 BR $539-$1078 Total development cost is $208,000 per unit , about 80% of the cost of the 3BR home, $318,000 $20,000,000 would build one more project like this in 5 years If local dollars were leveraged 3 to 1, it could mean 3 projects in 5 years if costs are constant, a total of 300 units If cost burden is the measure of disutility in the housing economy, then LIHTC projects don’t even make a dent in the problem .

8. Nob Hill Crossing Market rate project $5,581,697 36 Units 1-3 BR $1,650-$1,995 Total development cost is $155,000 per unit , about 48% of the cost of the 3BR home, $318,000 When compared to market rate projects, LIHTC projects are very expensive For every 100 units of LIHTC units, the market can create 125 What if we reduced permitting times and costs for private development?

9. When there is more supply, prices fall D evelopers there have been building more apartments than in any other city, measured as a share of the existing housing supply. That has helped curb the rise in rents, while also slowing new investment in existing apartment buildings. “Clearly, there’s some pockets of overbuilding,” said apartment investor Larry Connor, whose company manages a 15,000-unit national portfolio. Rents in Austin are down 7% during the past year , more than in any other city, according to estimates from listings website Apartment List. Austin was once America’s hottest housing market. Now prices are crashing. Home prices have fallen more than anywhere in the U.S., Wall Street Journal, March 18, 2024