Study Examines LIHTC Site Performance

LIHTC sites are operating better than in any other period during the program’s history, according to a recent study issued by CohnReznick, an accounting and advisory service firm. Entitled “Housing Tax Credit Investments: Investment and Operational Performance,” the study incorporated data from more than 22,000 Housing Credit properties, 33 Housing Credit syndicators, and two of the nation’s largest institutional investors.

The company rated the performance of these properties based on physical occupancy, economic occupancy, debt coverage ratio, and per-unit cash flow. The study’s authors also took into consideration factors such as project age and size, type of tenants, type of credit and type of development, location, availability of subsidy, and level of hard debt. Here are some of the study’s findings:

• The 2016 surveyed portfolio, on a median basis, had a 97.9 percent occupancy rate and an annual net cash flow of $688 per-unit, and funds available after paying for expenses, mandatory debt service, and required replacement reserve contributions;
• Due to the high demand for affordable housing, turnover rates for LIHTC sites are very low, bringing down the debt service ratios and driving up the cash flow;
• The debt coverage ratio improved between 2008 and 2016. In 2016, far fewer properties were having trouble paying their mortgages, and they had smaller deficits than in 2008.
• The cumulative foreclosure rate was well below 1 percent. This wasn’t surprising, because few LIHTC sites suffer from severe underperformance.