Eye On Housing
The Low-Income Housing Tax Credit (LIHTC) plays a critical role in the housing market by ensuring a supply of affordable rental housing. Created as part of the 1986 tax reform effort, the LIHTC, also known as the affordable housing credit, has been responsible for financing the development of more than 2.7 million rental homes.
The housing credit has been and remains a success story in terms of providing much needed rental housing and generating jobs and economic impact. For example, in a typical year the housing credit supports approximately 96,000 jobs.
The primary beneficiaries of the program have been the residents of the housing developed under the program. And while there is data concerning the demographics of who has benefitted from the credit, as far as we are aware there has been no accounting of how many people have resided in housing financed by the credit.
According to the analysis detailed below, we estimate that approximately 13.3 million people have resided in homes financed by the affordable housing credit as of 2013. This is a significant total and illustrates the important role the housing credit has played in terms of providing high quality, affordable rental housing.
Methodology
To estimate the total population of housing credit residents (a research question originally posed by Rick Goldstein of the Affordable Housing Tax Credit Coalition), it is necessary to determine first how many households have resided in units produced by the program since 1987. Next, the average number of people in each such household must be calculated.
According to the data from the National Council of State Housing Agencies (NCSHA), 2,798,776 rental residences have been financed under the housing credit from the start of the program in 1987 through the end of 2013.
Using data from the Department of Housing and Urban Development (HUD) LIHTC database, we can track 2,172,244 of that total by the year in which the property was placed into service. For the 626,532 units that are missing from the data but were part of the program, we conservatively estimate only one household for each of these residences.
For the remainder of the units, we estimate the number of households that have resided in these homes using the following method. According to data from the 2013 HUD/Census Bureau American Housing Survey, one-third of renter-households move after one year of residency, half have moved after two years, and two-thirds have moved after three years.
To match this rate of relocation, we model duration in affordable housing credit residences as having a 33% chance of relocation after one year of residency and 25% for each year after the first year. This produces a cumulative move rate of 33% after year one, almost 50% after year two, and more than 62% after year three. It is worth noting that these rates lie between Novogradac and Company data indicating for 100% credit properties an annual average turnover rate of just more than 20.5% and a higher 37% turnover rate reported for subsidized units in a National Apartment Association study.
While we do not have specific duration data for housing credit residents, HUD data from the 2008 Picture of Subsidized Households provide a useful cross-check. According to that database, 17% of current residents of HUD housing (public housing, housing choice voucher, section 8 and section 236 housing) had less than one year of residency. Using a mid-year test of residency on average, 17% is approximately half of the 33% probability of an end-of-first year move, making the two parameters roughly consistent.
An unknown factor is what percent of moves are from one tax credit unit to another tax credit residence. To account for this possibility and avoid double counting, we note that 21% of renters had no change in their housing costs when moving according to the 2013 American Housing Survey. We conservatively reduce this 21% by only one-third to model that 14% of relocating housing credit residents transfer into another home in the program.
Using the estimated movement rates and distributing the placed-in-service dates within each calendar year, we can estimate the number of households that have resided in each affordable housing credit home by age of the unit. For the more than 2.1 million households for which we have data, this calculation yields a total of 5.875 million households. With the addition of the more than 626,000 households for units without age data, this method provides an estimate of just more than 6.5 million households who have lived in housing credit financed homes as of 2013.
To estimate the number of people this total represents, we use an estimate from the 2014 American Community Survey (ACS) for the average household size for rental multifamily homes. We exclude single-family homes, which have larger household size, to be conservative. For the 2014 ACS, the average household size of rental multifamily was 2.05 people per household. Again, as a cross-check the 2008 HUD Picture of Subsidized Households provides an average household size of 2.2 for HUD housing.
Converting the 6.5 million household count into a measure of population yields a total of more than 13.3 million people who have resided in and benefited from housing built under the affordable housing credit program.
*** Thanks to the members of the ACTION Coalition Research Subcommittee for helpful comments and suggestions regarding this estimate.
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