Study Finds LIHTC Sites Continue Strong Performance for Investors

According to a new study commissioned by CohnReznick LLP, the LIHTC program, which reached its 30th anniversary in 2016, has consistently delivered strong results for tax credit housing investors. The study, entitled “The Low-Income Housing Tax Credit at Year 30: Recent Investment Performance (2013-2014),” is the fourth survey covering sites benefiting from the housing credit.

For the report, data on more than 20,000 properties was contributed by 39 organizations, including active housing syndicators and some of the largest housing investors and affordable housing organizations in the U.S.

For the years surveyed, national median physical occupancy was 97.5 percent, up from 97.0 percent in 2012, and median economic occupancy was 96.6 percent, according to the report, showing that the demand for affordable housing units has lowered the turnover rate in housing credit sites, reduced the costs associated with turning units over, and lowered the rental income loss associated with rent skips. Other key findings in the report include:

• DCR Debt Coverage Ratio (national median) improved to 1.33 in 2014, up from 1.30 in 2012.
• The number of housing credit sites “underperforming,” meaning those that reported physical occupancy below 90 percent or those that failed to achieve breakeven operations, is decreasing.
• The number of housing credit sites performing below breakeven was 16.9 percent in 2014, a large decrease from 35 percent in 2005. In addition, the 2014 deficits were typically modest amounts.
• The foreclosure rate reported by LIHTC sites, despite experiencing a modest increase in recent years, continues to compare very favorably with every other real estate asset class.