GAO Recommends Designating Agency to Improve LIHTC Administrative and Cost Oversight

The IRS doesn’t have the resources to collect detailed LIHTC cost information.

The U.S. Government Accountability Office (GAO) recently issued a brief report entitled, “Low-Income Housing Tax Credit: Opportunities to Improve Oversight.” The report highlights the fact that the U.S. has a widespread shortage of affordable housing and the LIHTC is the largest source of federal assistance for developing affordable rental housing.

Reasons for lax oversight. According to the report, despite the LIHTC program’s size and complexity, federal oversight of the tax credit has been minimal. It points to the IRS being the only federal agency that administers the program as the main reason. According to the IRS, the agency doesn’t have the authority or resources to collect and report detailed information on the tax credit. HUD collects some data on the program, but it doesn’t have the authority to collect cost data.

Cost data inconsistencies. In 2018, GAO determined the per-unit cost of 1,849 LIHTC projects in selected locations. Project characteristics such as construction type (new construction or rehabilitation), number of units, target income level (low-income or mixed), location (urban, suburban, or rural), and local housing market conditions explained some cost differences across projects. Due to differences in these characteristics, the GAO found that costs varied widely among the 12 housing finance agencies in the study.

Housing finance agencies have flexibility in what cost-related data to collect, how to maintain these data, and how to define variables for evaluating the program. GAO believes that inconsistency in how agencies collect cost-related data results in data limitations and limits oversight and analysis of the program’s efficiency and effectiveness.

Standardization would improve efficiency. The report recommends that Congress designate an agency to collect and report on LIHTC site development costs. The report also recommends the IRS encourage housing finance agencies and other LIHTC program participants to collaborate on developing standardized cost data. Currently, according to GAO, it’s difficult to compare cost drivers and trends across locations because federal oversight of cost data is limited and data collection is inconsistent.

The standardization of cost data would allow better analysis of cost drivers and cost-management practices, which could help increase the program’s efficiency.