Freddie Mac White Paper Highlights LIHTC in Rural Counties

LIHTC supports a little over 40 percent of the multifamily housing market in rural Persistent Poverty Counties (PPCs), according to a new Freddie Mac white paper.

Freddie Mac is a government-sponsored entity that provides fixed-rate or floating-rate loans to acquire or refinance all types of multifamily properties. These multifamily mortgages are used to finance properties such as market-rate apartments, student housing, senior housing, and affordable housing. Freddie Mac Multifamily has a specific mission to expand affordable rental housing for all Americans, and most of the loans that this group finances support affordable rental housing for low- and moderate-income households who earn no more than area median income.

Freddie Mac’s white paper found that LIHTC supports 40.1 percent of the multifamily housing market in rural PPCs. Developing unsubsidized rental housing in rural PPCs is challenging since household incomes are often too low to support units that can charge enough rent to cover construction and operating expenses. Consequently, subsidized housing is far more common in these areas than in other regions. However, the report finds that even subsidized housing faces challenges both in terms of economic feasibility and allocation of limited federal, state, and local funding.

The white paper, titled “LIHTC in Rural Persistent Poverty Counties,” is part of Freddie Mac’s three-year Duty to Serve plan to increase rental and homeownership opportunities in historically underserved markets throughout the nation. Here are some of the paper’s key findings:

• There are 7.9 million residents in rural PPCs. This represents 2.5 percent of the total U.S. population and 10.7 percent of the nation’s rural population.
• Income in rural PPCs is about 43 percent lower than the national average and 28 percent lower than the rural average.
• Rental housing, and multifamily rental housing in particular, is relatively uncommon in rural PPCs. Only 32.6 percent of households are renters (compared with 36.2 percent nationally). Single-family housing is the primary form of rental housing.
• The multifamily stock that does exist is supported by LIHTC at a higher rate than elsewhere in the country. LIHTC supports 40.1 percent of the multifamily housing market in rural PPCs, a rate that’s more than three times greater than the national average and one and a half times greater than all rural areas.
• In rural PPCs, an average of 54 properties and 2,370 units have been supported by LIHTC annually since 2000, although the rate has declined in the past decade (consistent with the national trend).
• LIHTC development faces many challenges, but still plays a vital role in addressing the rental housing needs for lower-income families in rural PPCs.