Freddie Mac Releases White Papers on LIHTC Use in Rural Areas
Freddie Mac recently published two white papers, “LIHTC in Middle Appalachia” and “LIHTC in Indian Areas,” highlighting how the LIHTC is being used to bring affordable rental housing to underserved markets. The series is a component of Freddie Mac’s Duty to Serve plan to expand rental and homeownership opportunities in historically underserved markets.
“LIHTC in Middle Appalachia” covers the region on both sides of the Appalachian Mountains stretching across parts of Kentucky, North Carolina, Ohio, Tennessee, Virginia, and West Virginia. The region has nearly 5.4 million people, with just 62.3 people per square mile compared to the national average of 90.2 people. Income levels in rural Middle Appalachia are nearly 40 percent lower than the national average and 20 percent below the average rural income. Additionally, almost a quarter of the population lives in a persistent poverty county (PPC) in which the poverty rate has exceeded 20 percent for the past 30 years. The homeownership rate in the region is higher than the national average (73.3 percent compared to 63.6 percent), and most renters live in one-unit properties and mobile homes.
The report says rural Middle Appalachia has approximately 656 properties with an active LIHTC subsidy, supporting 25,235 subsidized homes. Compared to all rural areas across the country, LIHTC units in the region support relatively fewer renter households. Over a quarter of multifamily renter households in Rural Middle Appalachia, however, live in LIHTC-supported homes, 10 percentage points higher than the national average. This higher reliance on LIHTC is because unsubsidized housing is otherwise very difficult to develop and maintain in the region due to high construction costs and low renter incomes.
The authors of the “LIHTC in Indian Areas” report estimate the population living on reservations in Indian Areas is between 788,000 and 2.2 million. It finds that there are more than 2,000 Housing Credit properties in Indian Areas, providing more than 80,000 units nationwide; however, not all of these properties specifically serve tribal members.
LIHTC properties in Indian Areas are normally unable to support hard debt (debt for which monthly or annual payments are required) and must rely entirely on equity, soft subordinate debt (e.g., loans with below-market interest rates or flexible repayment terms), and housing grants. Household incomes in these areas are generally too low for property owners to charge enough rent to support debt. The report finds that LIHTC is important for providing safe and affordable rental housing to tribal members who would otherwise have difficulty finding sufficient housing but that LIHTC funding is insufficient to meet the need and that developing and operating rental housing in Indian Areas for those with the lowest incomes is especially difficult.