Exploring Organizational Constraints on Spatial Patterns of Low-Income Housing Tax Credit Properties

• In Event: Impacts of Eviction and Access To Opportunity in Rental Assistance Programs

Abstract

In response to concerns about poverty concentration in US cities, policymakers have shaped housing policy in ways that can improve the livelihood of renters by creating access to affordable housing in neighborhoods with ample resources and economic opportunity. However, developers using LIHTC persistently build subsidized affordable housing that is clustered in low-income neighborhoods, despite incentives to do otherwise. In a recent study on the extent to which developers respond to incentives, Owens and Smith found that developers’ willingness to respond to incentives is shaped by their mission and financial resources, which can both constrain their choices in ways that map onto sector (2023). Specifically, developers with less financial resources and firm missions—likely mission-oriented nonprofits—were more likely to see incentives as one thing to consider among many when evaluating development projects. However, new data shows that mission-oriented nonprofits are revising their missions so that they can take on new types of projects in new areas. What explains this mission drift and the persistent clustering of properties in low-income neighborhoods? I answer this question using 39 interviews with developers, property managers, and service providers involved in the affordable housing industry in Los Angeles County, in addition to two years of visits to affordable housing development sites and educational trainings for affordable housing development staff. Interviews with developers represent 27 unique organizations, including 12 for-profits and 15 non-profits.

My preliminary findings suggest that there are several unexplored organizational constraints that impact site selection. First, the organizational structures of development organizations, and their accompanying preferences, shape the development opportunities they are willing to take on. Developers vary widely in this respect, from organizations that solely do development (more often for-profits) to organizations that do a mix of development, property management, social service provision, or social service outreach. For one organization that does development in addition to social services for the homeless, they are willing to develop housing in areas of LA County in which their social service outreach team has already developed relationships with clients and other organizations. Second, development organizations require various levels of work to maintain the organization and continue to pay staff, depending on the way their income is generated. Nonprofit developers rely on developer fees and philanthropic donations, whereas for-profit developers can structure their work to generate profit. Some mission-oriented developers, who are usually nonprofits, are constrained further by the nature of their mission, which is often to serve a limited geographic area. Such developers are recently finding that the development work available in their target area is not enough to financially sustain their organization, with several asking their board to allow them to develop in other areas of LA County. Third, developers seek to limit the uncertainty and accompanying financial risk during the development process. To mediate the risk of the unknown, developers often focus their efforts on locations they have worked in before. These findings offer new insights for policymakers looking to strengthen incentives that encourage developers to build affordable housing in high-opportunity locations.

Author

• Katherine Smock, University of California - Los Angeles
  Presenting Author