Low-Income Housing To Cost High
Affordable housing has become a concern for many in the U.S. as housing costs have increased.
Plenty of American cities need more low-income housing but the government has increased the construction costs with taxes, regulations, and bureaucracy and decreased the supply of housing. A report on the Los Angeles Low Income Project which is Lorena Plaza took 17 years to complete because of the opposition, lawsuits, and other rules. The 49 housing units of the housing project are costing $34.2 to build.
The report also talks about the state and local barriers to apartment construction but refuses to address a major barrier which is the Low Income Housing Tax Credit (LIHTC). The tax break is meant to help in housing construction but adds to costs and complexities.
The federal government distributes Low-Income Housing Tax Credits (LIHTC) to states, which are then awarded to developers for building apartment complexes with affordable rents for low-income tenants. States submit detailed plans to the federal government outlining how they will allocate LIHTC and manage housing projects. The complexity of LIHTC rules is evident in extensive manuals and guidebooks that provide intricate guidance on the program.
The financial structures of tax credit deals are more complex than market-based deals which increases costs. Also, tax credit allocations are based on estimated costs to encourage developers to inflate their estimates and provide incentives to find cost savings during construction.
The Low-Income Housing Tax Credit (LIHTC) primarily benefits investors, banks, and developers, rather than low-income tenants. The program has minimal federal oversight, and its complexity has deterred auditing efforts by the IRS. This lack of oversight has led to instances of abuse and corruption within the program.
Affordable housing is a serious problem and the solution is state and local regulatory reform, not federal tax subsidies.
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Edwards Chris. “High Costs of Low‐Income Housing”. Cato, December 18, 2023,
High Costs of Low-Income Housing | Cato at Liberty Blog
Last Updated: September 20, 2021