2017 Symposium Industry Report: Pay for Success

Occupants of public housing are the nation’s poorest and most vulnerable tenants. Families who qualify for public housing often have incomes that are far too low to afford housing on the private rental market. About one third of public housing occupants report income from wages and salaries, while another third receive federal welfare subsidies. Because the federal government has always allowed local communities to decide the locations of public housing units, they have tended to be concentrated in less expensive and less desirable neighbor- hoods. To save costs, public housing units are often austere and of lower quality than private rental units. The generally older and inferior quality of public hous- ing means that as time goes on, more resources are needed to renovate buildings. 2010 estimates indicate that overall, $19 billion is needed for modernization costs, in addition to another $3 billion in annually accrued needs. The National Commission on Severely Distressed Public Housing estimated that 6%, or 86,000, of the nation’s public housing units are severely distressed, meaning families live in areas defined by low opportunity, high rates of serious crimes, physically deteriorated buildings, and difficult-to-operate properties. The HOPE VI pro- gram has been the federal government’s largest attempt to redevelop distressed properties, investing $6.2 billion to renovate or construct public housing in 34 states. However, by replacing large public housing units with smaller mixed- income units, HOPE VI has reduced the overall supply of affordable housing units in the United States. Generally, less than half of the original occupants return to the redeveloped area. Overall, the supply of public housing has been steadily decreasing since the 1990s due to demolition of older, debilitating units and construction of mixed-income units. Thus, trends indicate that public housing has become steadily less available to the lowest income families who are in most need of government assistance. The changing climate of the public housing landscape means that the need for privately developed affordable housing units has never been greater. It is up to affordable housing advocates to step in and fill the gap in the housing market to provide safe and affordable housing to all. The Low-Income Housing Tax Credit The Low-Income Housing Tax Credit (LIHTC) was established in 1986 to provide financial incentives (through allocated tax credits) for investors and developers to develop and rehabilitate affordable housing units. Through the tax credit, over 2.5 million affordable housing units have been created, over twice as many as public housing programs. LIHTC sales account for 50 to 60 percent of equity cap- ital in most low income housing developments today. 76 LIHTC is a dollar-for-dollar reduction in federal income tax dues, dis- tributed to investors over ten years. States are responsible for the allocation and distribution of tax credits. Currently, states can allocate $2.20 in credits per cap- ita. Though housing credits can be used to directly subsidize affordable housing

28 Pay for Success & Affordable Housing | Stefano Rumi

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