In the current issue of Cityscape from HUD PD&R, researchers Alex Schwartz from The New School and Kirk McClure from the University of Kansas seek to explore how the Rental Assistance Demonstration (RAD) program will utilize Low-Income Housing Tax Credits (LIHTC) over the coming decade. The article documents the current use of LIHTCs in the RAD program and estimates the amount of LIHTCs the program will have consumed once all the authorized 455,000 units of public housing are converted to Project-Based Section 8. This article also attempts to evaluate the potential impact on LIHTCs if the entire portfolio of public housing units is eventually converted to RAD.
The researchers found that the RAD program has accounted for the use of about 25 percent of all 4% LIHTCs from the years between 2014-2017, and around 10 percent of all 9% LIHTCs. At its current pace, when estimating for the use of LIHTCs once the RAD program has reached its current cap of converting 455,000 units of public housing, the program will likely have used 26 percent of all 4% LIHTCs and 7 percent of all 9% LIHTCs available through 2029. It is also estimated that if the entire public housing stock were converted to RAD, the program would utilize three-fifths of all 4% LIHTC allocations and one-fifth of all 9% allocations over a 10-year span.
Because LIHTCs are greatly relied on for the preservation and development of affordable rental housing, outside of just the RAD and public housing programs, the researchers provide recommendations on how to address a limited supply of financial tools for an increasing need of affordable housing:
- Increase allocation of tax-exempt private activity bonds to low-income rental housing development.
- Increase the supply of private activity bonds and/or LIHTCs.
- Provide direct subsidies for public housing capital improvements.
- Increase the Capital Fund so that it is sufficient to cover the $70 billion backlog of public housing capital needs.
Click here to read the full article.