The low-income housing tax credit: An analysis of the first ten years

The Low-Income Housing Tax Credit (LIHTC) has been the de facto federal rental housing production program since its creation in the Tax Reform Act of 1986. In this article, using a detailed database on 2,554 LIHTC projects, we analyze the costs of building these projects, where they are built, their financial viability, whom they serve, who finances them, and the size of the subsidies provided to them. The LIHTC is a flexible program that has built different types of housing in various markets. While LIHTC projects serve low- and moderate-income households, their rents are beyond the reach of many poor households without additional subsidy. Revenues just cover costs for many LIHTC projects. Over time, considerably more of each tax-credit dollar has ended up in the projects, and returns to equity investors have dropped significantly, perhaps reflecting an increased understanding of project risks. We estimate that LIHTC projects developed by nonprofits are 20.3 percent more expensive than those developed by for-profits.