The Low-Income Tax Credit at 40: Implementation and Impacts

Session Submission Type: Panel

Abstract

The Low-Income Housing Tax Credit (LIHTC) is the biggest financing tool for affordable housing in the US. Over the last 40 years, LIHTC has been used to finance the development and renovation of more than 3.6 million rental units (Department of Housing and Urban Development 2024). This panel brings together four complementary papers, one that provides new estimates of LIHTC’s impact on housing affordability and three papers in conversation about how state-level policymaking affects LIHTC allocations and how LIHTC is used in to replace affordable housing stock following disasters. 

The first paper, The Impact of the Low-Income Housing Tax Credit on Housing Supply and Affordability, estimates the causal effect of LIHTC allocation on the amount of rental housing affordable at multiple income levels. It exploits discontinuities in the formulas that determine the magnitude of tax credits based on neighborhood characteristics to generate causal estimates. Through this analysis, the authors examine the extent to which LITHC adds to the stock of affordable housing and whether the program crowds-out of market-rate units. 

The second paper, How Qualified Allocation Plan (QAP) Components Affect Costs and Time to Develop, identifies strategies and best practices that states are employing to reduce overall development cost and time, while still meeting the goals of the LIHTC program and the unique needs of the state’s population. It highlights how variations it QAPs can create barriers to development, as well as examples of what strategies and processes may promote more time- and cost-effective development. It further explores how these policies and practices may be applicable across different states and regions. 

The third paper, Disaster Provisions in Low-income Housing Tax Credit Qualified Allocation Plans, explores how state-level policy variation in QAP disaster recovery provisions shape the allocation of LIHTC units following flood disasters. It examines the extent to which these provisions influence per-capita allocations of LIHTC units to flood-affected counties. The authors a novel dataset of QAP disaster provisions across states and over time by systematically coding QAPs across states from 2003 to 2022 and links these policies to county-level flood exposure and LIHTC allocations. It then estimates the relationship between recovery provisions and LIHTC allocations to affected counties. 

The final paper, Developing Affordable Housing in Disaster-affected Communities, quantifies the extent of LIHTC use by disaster-affected counties and explores how LIHTC is used in conjunction with other sources of financing to rebuild the affordable housing stock following natural disasters. It includes both a national accounting of LIHTC developments placed in use in disaster-affected communities and case studies of affordable housing development as part of the disaster recovery plans implemented by CDBG-DR grantees.

Policy Area

• Housing, Community Development, and Urban Policy

Chair

• Patrick Meehan, University of Michigan

Discussant

• Yung Chun, Washington University in St. Louis

Organizer

• Daniel C Teles, Urban Institute

Individual Presentations

• The Impact of the Low-Income Housing Tax Credit on Housing Supply and Affordability - Presenting Author: Christina Plerhoples Stacy, Urban Institute

• How Qualified Allocation Plan (QAP) Components Affect Costs and Time to Develop - Presenting Author: Daniel Hornung, Stanford University

• Disaster Provisions in Low-income Housing Tax Credit Qualified Allocation Plans (QAPs) - Presenting Author: Bella Vandersall, University of North Carolina at Chapel Hill

• Developing Affordable Housing in Disaster-affected Communities - Presenting Author: Daniel C Teles, Urban Institute