How Affordable Do Sites Remain After Exiting LIHTC?

LIHTC sites that exit the LIHTC program often remain more affordable than conventional market rate properties that were never subsidized, even if they are not resyndicated, according to recently published research by Freddie Mac Multifamily. The research fulfills commitments under Freddie Mac’s Duty to Serve and Equitable Housing Finance Plans and is intended to paint a picture of the risk that currently exists in the market and the potential severity of affordability loss.

One level deeper: While most sites that exited the LIHTC program have increased rents above the maximum level of allowed rent in the program, the research finds the increases are generally modest. In this way, the research finds that former LIHTC sites commonly transition to workforce housing, remaining affordable to tenants who earn below the area median income (AMI).

Researchers sampled 133 former LIHTC sites across seven markets. Rents were lower by an average of 12 percent, but differences varied widely across the cities that were studied. For example, former LIHTC sites in Dallas offered rents nearly 27 percent below market, but rents in Phoenix were just 3 percent below market.

The research says 86.8 percent of LIHTC sites are “programmatic,” meaning they remain in the program and are subject to rent restriction. However, a number of sites will be able to potentially exit in the coming years.

The bottom line: According to the research, non-programmatic LIHTC sites or sites that have left the program generally have higher rents compared with LIHTC-restricted units, but lower rents compared with conventional market rate units. Some non-programmatic LIHTC properties increase rents substantially above 60 percent AMI affordable rents, but the majority are still affordable at this level. The most common path for a non-programmatic LIHTC unit is to remain affordable at 60 percent AMI, which happens roughly 61 percent of the time.