The headline news in last week’s Freddie Mac white paper could be considered somewhat promising — rents were lower than market comparables by an average of 12% at units that formerly had Low-Income Housing Tax Credit income restrictions.

But dig a little deeper in the white paper and another number sticks out — 0%. While the median former LIHTC unit was affordable at 60% of area median income after rent restrictions expired, there were no units affordable to 30% of AMI. 

Properties financed using tax credits must remain affordable at specific income levels. While that is often 60% of the AMI, they can also provide affordable housing down to 30% of AMI.

“Since market rents can almost never support rents at this level, the conversion of a LIHTC property to market rate typically means the loss of deeply affordable units at 30% AMI,” according to the Freddie Mac white paper.

LIHTC units that were affordable to people making 30% of AMI saw the largest increases when they exited the compliance period. 

“The LIHTC properties priced more deeply affordable for the lowest income renters saw much greater increases when the restrictions expired,” said Andrew Aurand, vice president for research at the Washington D.C.-based advocacy group National Low Income Housing Coalition. “That makes sense because rents for households at 30% of AMI are much lower than market rate.”

Rent pressures

With renters already facing other inflationary pressures, any increase in rent can be a significant financial challenge.

“Those renters, if they don't have another form of rental assistance, like a voucher, don't have any protections and they probably don't have many options on anywhere else to go,” Aurand said. “And so it's a huge risk to their housing stability.”

Overall, the NLIHC said that there are only 36 units available for every 100 renters earning 30% of AMI. Closing the gap will require major public investment through programs like the National Housing Trust Fund, according to Aurand. Under the trust fund, the federal government provides states with grants to help fund building, rehabilitating, preserving and operating rental housing for extremely low-income people. 

“We need to invest in programs that serve extremely low-income renters,” Aurand said. “We also need more housing choice vouchers that extremely low-income renters can use to afford housing in the private markets.”

These vouchers provide renters with flexibility. “Vouchers provide the renter with some ability to find other housing,” Aurand said. “If I’m in a LIHTC property and rents go up because rent restrictions have gone away and I have a voucher, at least I have some ability to find another unit that I can afford.”

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