Affordable Housing for Families and Neighborhoods: The Value of Low-Income Housing Tax Credits in New York City
Since the late 1980s, the Federal Low-Income Housing Tax Credit (LIHTC) has acted as an engine of affordable housing production, building about 2 million high-quality units that rent for amounts working families can afford to pay. Organizations working to improve conditions in low-income communities have also used the program to revitalize hundreds of once-downtrodden neighborhoods. Drawing on the program’s experience in New York City, this report joins a growing body of technical research examining the tax credit’s value to communities and low-income
To carry out this research, the Local Initiatives Support Corporation (LISC) and Enterprise Community Partners (Enterprise) commissioned New York University’s Furman Center for Real Estate and Urban Policy (Furman Center) to assess the effects of LIHTC projects throughout New York City on property values, which reflect the market’s assessment of neighborhood quality. LISC and Enterprise staff and consultants followed up this broad statistical analysis with in-depth interviews in two sample housing developments in the Bronx. Findings from this research include:
- Families paying affordable rents averaging $500 per month less than market rates more than doubled their discretionary income, putting them in position to buy health insurance, pay down debt, or amass savings to pay for education or buy a home. The total monthly benefit for one of the examples, which includes 46 units in four buildings, is $23,000 – translating into a 12 percent immediate annual “return” on the original $2.1 million investment.
- A cluster of developments in the Belmont commercial area in the Bronx boosted estimated local purchasing power by more than one-third, contributing significantly to the retail vitality of the neighborhood and the availability of goods and services to residents.
- Throughout New York, project investments produced a significant increase in property values, reducing the difference in the value of properties that were located near the LIHTC projects and those that were farther away. On average, that gap was closed by six percentage points right away, reflecting improved neighborhood quality as perceived in the marketplace. Within five years, the gap decreased by nearly 10 percentage points as revitalization effects took hold. Based on one of the sample developments, the boost in property tax revenues from the newly increased values of nearby properties amounted to an immediate return of as much as 50 percent on the original housing development investment.
- Statistical results validate community development practice in a number of areas, including the benefits of affordable housing development to lower-income and higher-income neighborhoods alike and the wisdom of clustering smaller projects within neighborhoods instead of concentrating units on one site.