Report Examines Tax Reform’s Effect on LIHTC Program

According to a new report from the Urban Institute, a nonprofit research organization, although the LIHTC is the biggest source of funding for new affordable rental housing, it faces legislative and economic challenges. According to the report, entitled “The Low-Income Housing Tax Credit: Past Achievements, Future Challenges,” the recent tax reform legislation “will have an uncertain effect on future low-income housing tax credit investments because a reduction in corporate taxes lessens the financial incentive for corporations to make equity investments in tax credits.” The report notes that the housing credit is especially critical to rural communities that may be most vulnerable to decline in program investments.

The report also points out that the fate of LIHTC is linked with that of other federal housing programs because it frequently leverages other federal funding sources such as HOME and, more recently, the National Housing Trust Fund. “If other federal housing programs get cut, LIHTC may shift more toward preservation, financing the capital requirements of a building without the additional subsidies needed to reach the lowest-income households. This could mean fewer investments in the new construction of additional supply, fewer units available to extremely low-income households, and an overall stagnating supply of affordable rental housing across the U.S.,” says the report.