Challenges for Low-Income Housing Tax Credit Projects at Year 15 and Beyond in a Weak Housing Market: The Case of Detroit, Michigan

ABSTRACT Projects financed through the Low-Income Housing Tax Credit (LIHTC) program, the largest producer of affordable housing in the United States, face ownership transition after 15 years in service when tax-credit investors leave. In Detroit, Michigan, projects whose transitions were complete but that were subject to additional affordability restrictions fared much worse than national surveys showed. Many projects continued to provide affordable housing, but a share experienced mortgage or tax foreclosure, and many units became permanently uninhabitable, increasing disinvestment in neighborhoods. Projects reaching year 15 from 2016 through 2022 were under considerable financial stress as of 2015 and would likely need financial restructuring. Few high-capacity nonprofit developers existed to assume property ownership. The intervention of mission-driven syndicators helped stabilize numerous projects. Detroit’s experience illustrates the challenges LIHTC projects are likely to face in weak-market cities. Additional studies should investigate the year-15 challenges in diverse housing markets and the efforts to address those challenges.

[1]  I. Ellen,et al.  Gateway to Opportunity? Disparities in Neighborhood Conditions Among Low-Income Housing Tax Credit Residents , 2018 .

[2]  Lan Deng,et al.  Saving Strong Neighborhoods From the Destruction of Mortgage Foreclosures: The Impact of Community-Based Efforts in Detroit, Michigan , 2018 .

[3]  Dale E. Thomson,et al.  Fiscal Crisis and Community Development: The Great Recession, Support Networks, and Community Development Corporation Capacity , 2017 .

[4]  K. O’Regan,et al.  Poverty concentration and the Low Income Housing Tax Credit: Effects of siting and tenant composition , 2016 .

[5]  Michael C. Lens,et al.  Preserving Neighborhood Opportunity: Where Federal Housing Subsidies Expire , 2016, Housing policy debate.

[6]  Nathan Bomey,et al.  Detroit Resurrected: To Bankruptcy and Back , 2016 .

[7]  Margaret Dewar,et al.  Disinvesting in the City , 2015 .

[8]  Margaret Dewar,et al.  Chapter 8. What Helps or Hinders Nonprofit Developers in Reusing Vacant, Abandoned, and Contaminated Property? , 2013 .

[9]  D. Massey,et al.  Do Affordable Housing Projects Harm Suburban Communities? Crime, Property Values, and Taxes in Mount Laurel, NJ , 2013, City & community.

[10]  Lan Deng.  Chapter 2. Building Affordable Housing in Cities After Abandonment: The Case of Low Income Housing Tax Credit Developments in Detroit , 2013 .

[11]  J. Thomas,et al.  The city after abandonment , 2013 .

[12]  Carissa G. Climaco,et al.  What Happens to Low-Income Housing Tax Credit Properties at Year 15 and Beyond? , 2012 .

[13]  Alex Schwartz,et al.  Year 15 and Preservation of Tax-Credit Housing for Low-Income Households: An Assessment of Risk , 2008 .

[14]  A. Schwartz,et al.  After year 15: Challenges to the preservation of housing financed with low‐income housing tax credits , 2008 .

[15]  Lan Deng.  Comparing the Effects of Housing Vouchers and Low-Income Housing Tax Credits on Neighborhood Integration and School Quality , 2007 .

[16]  Lan Deng.  Comparing the Effects of Housing Vouchers and Low-Income Housing Tax Credits on Neighborhood Integration and School Quality , 2007 .

[17]  Kirk McClure.  The low‐income housing tax credit program goes mainstream and moves to the suburbs , 2006 .

[18]  Lan Deng.  The cost‐effectiveness of the low‐income housing tax credit relative to vouchers: Evidence from six metropolitan areas , 2005 .

[19]  A. Schwartz,et al.  The Status of Nonprofit-Owned Affordable Housing: Short-Term Successes and Long-Term Challenges , 1998 .

[20]  James E. Wallace,et al.  12. Preservation of the Existing Stock of Assisted Private Housing , 1990 .

[21]  Queensland,et al.  2011 Census of Population and Housing , 2011 .

[22]  M. Huggett,et al.  CDMA 09 / 02 A Model of Near-Rational Exuberance * , 2009 .

[23]  D. A. Smith.  Mark‐to‐market: A fundamental shift in affordable housing policy , 1999 .