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Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (LIHTC) is a terrible program. What is it? It is the principal path the federal government adopted to provide low-income housing except it doesn't. LIHTC birthed in Reagan's infamous tax bill of 1986, gave private investors "a federal income tax credit as an incentive to make equity investments in affordable rental housing." If a developer agrees to 20 percent of the units being so called low-income, then the developer is eligible for the tax credit for those units. However, there are two major flaws: the units are not really low-income and the entire program disappears after 30 years when the developer can charge market rates. 

LIHTC became the brainchild of the real estate industry that was desperate to stop the construction of public housing in which the real estate sages could not profit. And stop it they did. Now, almost 40 years later, even liberal think tanks, like the Urban Institute, will laud the successes of LIHTC. After all, it produced millions of units of affordable housing for a limited number of years. We have become so used to supply side arguments, that we don't bother looking to other countries to see how they did it - how did they create permanent low-income public housing? 

In Vienna, Austria, its federal government has created social housing rather than public housing. The government has two models. In one, government owns the land and the apartment building and maintains the building. The mixed-income units range from high-income to extremely low-income all in the same building with rents based upon income. In the other, the government owns the land, pays a developer to build and maintain the apartment building, and the federal government maintains oversight. These apartment units remain affordable forever, not 30 years. And it is mixed-income housing, so it takes away the issue with public housing in the United States which turned into welfare housing only for the poor.

To make our federal housing policy even worse, there was an amendment called the Faircloth Amendment to the "Quality Housing and Work Responsibility Act of 1998. It amended the Housing Act of 1937, which authorized federal financial assistance to help states and housing authorities provide housing for low-income people." And this is thanks to Bill Clinton who was a far worse president than we want to believe. The Faircloth Amendment said that a local housing authority cannot use federal dollars to build more public housing than it already has. So that ended expanding federal public housing. And every time progressives in the House of Representatives try to end the Faircloth Amendment, it gets voted down. So, your federal government is at work promoting the private sector and limiting the public sector from building more low-income housing. First the Republicans through Ronald Reagan and then the Democrats through Bill Clinton screwed poor people and continue to do so. But the real estate industry is flying high.