The study indicates that the average rent for Housing Credit properties is 38% lower than average market-rate rents.
Across the nine markets analyzed in the study between 2012 and 2017, market-rate rents in the nine markets grew 5% on average per year while Housing Credit properties’ rents rose an average of 0.9% annually.
The study points out that the substantial market-rate rent increases are causing serious financial hardship, particularly for lower-income households that qualified for but were unable to move into Housing Credit units because too few were available.
The impact of the Housing Credit is even greater in areas such as parts of New Jersey in the New York Metropolitan Area where there is a serious affordable housing crisis.
“Averaged across all nine of the surveyed markets in 2017, a renter in a market-rate unit spent $7,500 more per year in rent than a renter in a similarly sized two-bedroom LIHTC unit. In high-cost areas, such as Hudson County, N.J., the difference was even greater, totaling more than $22,000 in annual rent savings in a restricted unit,” finds the study by Freddie Mac Multifamily’s Research and Modeling team.
In Hudson County between 2012 and 2017, LIHTC rents grew by 3.2% while market rate rents only grew by 1.6%
The Housing Credit is the “workhorse” in the development of affordable housing. “The federal LIHTC program is the nation’s main source of financing for the development and rehabilitation of affordable housing. Since its creation in 1986, the housing credit has financed 3 million affordable apartments, providing homes to about 7 million low-income households.”
But there are simply not enough affordable housing units to go around and far too many eligible families are forced to pay market rents that they can’t afford.
Congress Expands, Strengthens the Housing Credit in FY 2018 Omnibus
A 12.5 percent increase in Housing Credit allocation authority for four years (2018-2021). While this is not as significant an increase as the 50 percent phased-in permanent cap increase proposed in S. 548, it provides a substantial level of new resources and will allow for the construction or rehabilitation of an additional 28,400 affordable rental homes over the next decade, according to Novogradac & Co. estimates. This is the first expansion of the Housing Credit in ten years.
Income averaging, on a permanent basis moving forward. Income averaging would allow Housing Credit units to serve households earning up to 80 percent of area median income (AMI), offset by deeper targeting in other units to maintain average affordability in the development at 60 percent AMI. The 60 percent AMI ceiling would apply to the average income limit for all apartments in a development rather than each individual Housing Credit apartment.