The affordable housing credit (the Low-Income Housing Tax Credit or LIHTC) plays a critical role in the housing sector by ensuring a supply of attainable rental housing. Created as part of the 1986 tax reform legislation, the LIHTC has been responsible for financing the development or preservation of more than 3.2 million rental homes. Moreover, the housing credit has been a success story in terms of generating jobs and economic impact for communities.
However, the primary beneficiaries of the program have been the residents of the housing developed under the program. Adding to analysis concerning the demographics of LIHTC housing, we are updating the estimate of the count of residents who have benefited from the program.
According to the modeling detailed below, we estimate that approximately low-income 18.7 million people, or 8 million low-income households, have resided in homes financed by the affordable housing credit as of 2018. This is a significant total and illustrates the important role the housing credit has played in terms of providing high quality, affordable rental housing.
To estimate the total population of housing credit residents, it is necessary to determine first how many households have resided in units produced by the program from 1987 to 2018 (the latest year unit count data is available). Next, the average number of people in each household must be calculated.
Using data from the Department of Housing and Urban Development (HUD) LIHTC database, Enterprise Community Partners analysts accounted for and tabulated a total of 2.92 million homes by the year in which the property was placed into service through the end of 2018.
We estimate the number of households that have resided in these homes using the following method. According to data from 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 prior Novogradac and Company data indicating that credit properties have an annual average turnover rate of just more than 20.5%, with a higher 37% turnover rate reported for subsidized units in an earlier 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 American Housing Survey. We thus conservatively estimate that for existing LIHTC households, 31% of relocations are from one tax credit home to another tax credit residence. This is based on an assumption that the 21% share noted above represented approximately 2/3 of such moves.
Using the calculated 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 unit by age. For the more than 2.9 million units for which we have data, this calculation yields a total of 8 million households who have lived in housing credit financed homes as of 2018.
To estimate the number of people this total represents, we use an estimate from Enterprise for the average household size for rental multifamily homes. This estimate is 2.33 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 8 million household count into a measure of population yields a total of more than 18.7 million people who have resided in and benefited from housing built under the affordable housing credit program.
*** This estimate is an update of a November 2015 estimate for the program. Thanks to the Enterprise Community Partners research team for compiling the revised HUD data, estimating average household size, and comments and suggestions regarding this estimate.