New Analysis Highlights Benefits of Rent-Restricted LIHTC Sites
A new analysis by Freddie Mac has concluded that over the past five years, individuals living in apartments with rents restricted through the LIHTC program have saved thousands of dollars annually compared to similar, market-rate properties. Authored by Freddie Mac Multifamily’s Research and Modeling team, the new research looks at nine representative counties across the United States and concludes that in those areas, the average LIHTC-restricted rent was 38 percent lower than the average market rate rent in 2017.
The paper goes on to point out that, averaged across the surveyed markets, a renter in a market-rate, two-bedroom unit spent $7,500 more per year than a renter in a similar LIHTC property. In higher cost areas, this difference totaled more than $22,000.
The paper compared average market-rate rents against restricted rents for two-bedroom units in nine counties across the country, looking at four in-depth. It concludes that between 2012 and 2017, market rent increases ranged from 1.6 percent to 7.9 percent annually. This averaged 5 percent annually. Annual rent spikes of more than 7 percent took place in seven of the markets.
During the same period, restricted rents saw stable and measured growth. Changes ranged from -0.7 percent to 3.2 percent annually, and averaged 0.9 percent per year. The greatest annual rent spike was less than 5.5 percent. This means that in 2017, a tenant in a market-rate unit spent anywhere from $7,500 to $22,000 more per year than a tenant in a similar, LIHTC-restricted rent unit. While restricted rentals will continue to be much more affordable, the paper does predict that formulas determining restricted rents suggest increases in the coming two years.
According to the paper, “Renters in units with restricted rents enjoy significant benefits over their counterparts in market-rate housing, many of whom qualify for restricted rents but due to the lack of available supply are unable to benefit...For those households that qualified for, but were unable to move into rent-restricted housing, the substantial market-rate rent increases since 2012 are causing serious financial hardship.”