Study: Income-Averaging Set-Aside to Increase Affordable Housing Development

The 2018 omnibus spending bill passed earlier this year authorized the “income-averaging” option for minimum set-aside elections in the LIHTC program. The option replaces the 60 percent area median income (AMI) maximum eligible income for LIHTC sites with 80 percent for units where the site-wide average doesn’t exceed 60 percent.

Affordable housing advocates hailed it as a way to serve a wider range of households and encourage development in more markets, particularly low-poverty, racially diverse neighborhoods. At a recent National Council of State Housing Agencies 2018 Conference & Showplace in Austin, Capital One conducted a survey of affordable housing leaders and lenders. Sixty-eight percent said the income-averaging set-aside will lead to more affordable housing, with 61 percent expecting it to have the most impact in urban markets. Fifty-three percent of those surveyed by Capital One cited the social impact of income diversity as the primary attraction of income averaging.

While supporting the concept, the respondents did raise some questions about the rollout of the new rules, with 33 percent identifying “lack of clarity about state and local implementation” and 32 percent citing “gray areas in the legislation” as the greatest impediments to its adoption.

The survey also asked respondents about creating affordable housing for the special needs segment and found 41 percent expect development activity next year will be highest in disability communities, followed by 32 percent who predicted it would be higher in senior communities.