NPR and Frontline Investigate LIHTC Program, Industry Responds

On May 9, the television series Frontline aired an installment of a joint investigation with NPR on the affordable housing crisis. This particular episode, titled “Poverty, Politics and Profit,” took a look at the LIHTC program. After the airing, affordable housing industry organizations quickly disputed what they referred to as misleading depictions of the LIHTC program in a joint statement. 

According to the organizations, the episode implied that the affordable housing crisis is perpetuated by a combination of excessive profits and rampant corruption. The episode found that between 1997 and 2014, the annual number of units dropped 16 percent, from 70,220 to 58,735. The organizations said the best available data unambiguously show that the profits of investors and fees of syndicators (investment managers) have declined significantly over the years, while developer fees are strictly controlled by state housing finance agencies.

Syndicator fees for affordable housing programs last year, about $300 million, were paid by investors for services rendered in organizing about $9 billion in private equity investments used to build housing. This amounts to fees of 3 percent of the funds raised. 

Also, affordable housing sites have required more housing credits in recent years because of multiple economic factors having nothing to do with profits. Construction costs for all types of real estate have increased substantially in recent years. Properties are underwritten to serve lower income residents at lower rents than before, as required by federal law. Other government funds that fill the financing gap for this housing have declined sharply. 

The show asserted that there was “little government oversight,” quoting a claim that there have been only seven Internal Revenue Service audits of the state programs in 29 years. But the organizations point out that Frontline did not examine the IRS’s broader record or the overall enforcement records of the state agencies and investors who share primary oversight responsibilities. According to the Government Accountability Office, the IRS has performed hundreds of audits of housing credit taxpayers since 1995. Moreover, as directed by Congress, state agencies take the lead on oversight, working with the IRS. They regularly conduct extensive reviews of LIHTC sites to ensure compliance with the rules, inspecting their physical and financial condition and certifying their occupancy by qualified low-income residents.

The organizations’ response also points out that numerous studies show that the housing credit has reached low-poverty neighborhoods more effectively than earlier subsidized affordable housing programs, despite the report’s suggestion that the LIHTC program contributes to concentrated poverty. A recent report by the Department of Housing and Urban Development found that states are prioritizing more LIHTC sites in high-opportunity areas. New construction is equally common in high-opportunity and high-poverty areas. And the pending Affordable Housing Credit Improvement Act, which advocates of affordable housing broadly support, includes several provisions that would facilitate Housing Credit development in high-opportunity areas.