Year 15 and Preservation of Tax-Credit Housing for Low-Income Households: An Assessment of Risk

Author： Melendez Edwin Schwartz Alex Montrichard Alexandra de

ISSN： 1466-1810

Source： Housing Studies, Vol.23, Iss.1, 2008-01, pp. : 67-87

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Abstract

This paper examines the risk associated with the expiration of the initial 15-year period protecting affordability for housing units developed using the federal Low-Income Housing Tax-Credit (LIHTC). The paper finds that the primary determinants of risk for properties with credit allocated between 1987 and 1989 are reduced by three factors: whether not-for-profit sponsors are part of the ownership structure of the projects, the existence of additional affordability restrictions, and the rehabilitation costs associated with the conversion to market rental. The proportion of properties in need of rehabilitation increased substantially in the post-1989 period, representing a different type of risk for tax-credit projects. It is concluded that state agencies have the opportunity to promote and support preservation measures by adding additional affordability restrictions as part of any refinancing related to capital improvements, by supporting non-profit sponsorship of projects, and by providing funding for rehabilitation.