2017 Symposium Industry Report: Pay for Success

units, most developers sell the credits on a secondary market through syndi- cators to interested investors and corporations, using the proceeds to finance development. Additional “gap” funding is acquired through other means, such as block grants and capital from housing trust funds. Not-for-profit housing groups account for about 22% of all developments and 19% of all affordable housing units in the United States. About 96% of apartments in a tax-credit project are designated for low-income households. About 62% of all tax-credit projects are new construc- tion, while rehabilitation accounts for almost all of the rest. Tax credit housing is generally located in low-income and minority neighborhoods more than other types of rental housing. A 2009 study demonstrated that 44% of tax-credit units are located in tracts with over 50% minority population. 77 However, tax-credit projects are much less concentrated in minority and poor neighborhoods than other government-based housing projects, such as Section 8 housing. In addi- tion, research suggests that tax-credit housing is more effective than vouch- ers in promoting housing mobility of low-income residents to more affluent neighborhoods. 78 LIHTC-subsidized housing is generally financially viable. Studies demonstrate that the median occupancy rate of units is 96.6%, which is much higher than the recommended 89–91% threshold. Only about 12.4% of properties reported occupancy rates of less than 90%. However, some claim that tax credits are inefficient due to transaction costs and investor profits. Others claim that underwriting low income housing projects is cumbersome and complicated, and may deter more developers from getting involved, limiting the number of afford- able housing units available to those in need. The Future of Housing Policy The 2008 financial crisis and accompanying economic recession clearly demon- strated the vulnerability of our nation’s housing stock, with millions of homes put into foreclosure and families pushed into rental housing, competing for already scarce space with other renters. The future of affordable housing relies on strong advocates in the public sector who prioritize consistent and sufficient funding for affordable housing projects in local communities. The key to suc- cessful affordable housing projects is not just construction, but also the main- tenance, of units. Public financing should be paired with private sector and not-for-profit housing and service providers through contracts and partnerships with third sector organizations (TSOs) in areas such as health, housing and social care. This third sector model, although now just being adapted to other industries, has proven to be a remarkable tool in the housing industry to promote safe and affordable housing for decades. Future policymakers must continue to foster this relationship and expand it to encompass more aspects of affordable housing, such as resident services and supportive housing initiatives. Programs

Pay for Success & Affordable Housing | Stefano Rumi 29

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