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The case for housing tax credits

Low Income Housing Tax Credits (LIHTC) finance just about every affordable rental housing unit in the country. And while LIHTC may be an imperfect tool in the imperfect world of anti-poverty work, they are a tremendous driver of investment in low-income neighborhoods and stimulate some $9.1 billion in local income, writes Denise Scott, LISC’s executive vice president for programs, in a column for New York University’s Furman Center. Says Scott, we need to shore up support for the LIHTC program in the neighborhoods in greatest need.

The excerpt below is from:
"Building More Than Housing"
as published in NYU Furman Center's discussion series "The Dream Revisited"

It’s hard to believe a program little known beyond community development circles is now central to the national debate about poverty. And yet, the Low-Income Housing Tax Credit (LIHTC) is increasingly viewed as a tool to promote economic mobility for the poorest Americans.

It is clear why—the housing credit helps finance almost all affordable rental housing in the country. Over the last three decades it has leveraged more than $100 billion in private capital to build 2.7 million rental apartments in urban, rural and suburban areas. By almost any measure, it has been a tremendous public policy success.

But, by primarily directing resources to low-income neighborhoods, some people are asking whether it has also reinforced segregation and concentrations of poverty in certain places.

Brookland Artspace Lofts - Washington, DC
Brookland Artspace Lofts - Washington, DC

It’s a tough question. It speaks to this country’s history of housing discrimination and the legacy of high crime, struggling schools and poor health it has left us. We know that some children benefit from moving to neighborhoods with less poverty. We also know that some families are deeply rooted in their communities and want to raise the standards of living in the places they call home. State and local housing finance agencies (HFAs) that allocate the housing credit need to balance these two opportunities as they craft their Qualified Allocation Plans to respond to gaps in their local housing landscape.

At the same time, we shouldn’t overlook the fact that the housing credit has an anti-poverty impact that goes well beyond the number of apartments built.  The credit spurs considerable economic development that engages the private market in places long starved for capital. It lays the groundwork for new businesses, health centers, schools, parks, and jobs. Because of this broad reach, a dollar of LIHTC capital typically has a much greater impact in low-income areas than it does in other places. It isn’t just residents of these projects that benefit—so, too, do nearby neighbors and business owners in low-income areas.

Harlem might be the best example of how investments using the housing credit—especially those led by neighborhood nonprofits—have spurred new stores and restaurants, improved schools, cleaned-up parks, and expanded access to health care. Indeed, as Harlem has gentrified, the housing credit has helped ensure that low-income people can still afford to live there to enjoy the benefits.

the housing credit has an anti-poverty impact that goes well beyond the number of apartments built.

Versions of that experience can be found in communities across the country. In Boston’s Roxbury neighborhood, early investments in housing continue to drive steady progress. And, in Washington, D.C.’s Brookland neighborhood, LIHTC capital has helped fuel an arts-centered revitalization near the local metro station. It’s not that the credit has eradicated poverty—some people still struggle to find good jobs and crime is still a concern. But, incomes are on the rise and people generally feel safer. These are communities that now offer opportunities to residents. Continued[+]...

Denise ScottABOUT THE AUTHOR

Denise Scott, Executive Vice President for Programs
With three decades of experience in community development, Ms. Scott leads LISC’s neighborhood investment efforts in 30 cities and rural areas in 39 states. She previously managed LISC’s flagship program in New York City, focusing on affordable housing, commercial corridors, education, health, and jobs in some of the city’s toughest neighborhoods.

LIHTC has helped build $2.7 million rental homes
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