December 01, 2009

The Disruption of the Low-Income Housing Tax Credit Program: Causes, Consequences, Responses, and Proposed Correctives

Joint Center for Housing Studies

As a result of the credit market meltdown, the Low-Income Housing Tax Credit (LIHTC) program, the nation’s primary mechanism for producing and preserving affordable rental housing, was severely disrupted in 2008 and 2009. When the corporate investors on which the program relied—primarily large, national banks and Fannie Mae and Freddie Mac—swung from profitability to loss and could no longer use tax credits, demand for LIHTCs plummeted. As a result, the price of LIHTCs fell, creating funding gaps in projects that had received tax credit allocations in 2007 and 2008 but had not yet sold them. Thousands of projects and tens of thousands of units that would have otherwise been bought or rehabilitated stalled. It is important to recognize that the LIHTC crisis is due to a drop in investor demand in the wake of the worst financial crisis since the Great Depression, not with the performance of the program to date in delivering affordable housing at a very low loss rate…

Category: Reports

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