Last week the Government Accountability Office (GAO) released a report on Low-Income Housing Tax Credit (Housing Credit) development costs, which analyzes total development costs in Housing Credit properties across 12 allocating agencies in 10 states between 2011 and 2015. This report is the last in a series of studies GAO has conducted on the Housing Credit program in recent years, completed at the request of Senator Charles Grassley (R-IA).
Overall, the report found wide variation in development costs, resulting from the variety of geographies in the states it surveyed, which range from rural areas in more affordable regions of the country to some of the nation’s highest cost cities, and other property and tenant characteristics of the housing included in GAO’s data set. The report also illustrates state agencies’ comprehensive and consistent efforts to ensure reasonable development costs in Housing Credit properties.
GAO makes several recommendations to IRS and Congress regarding cost certification practices, data collection, and treatment of syndication fees, which it says would improve development cost assessment. These recommendations include: 1) Congress should consider designating a federal agency to maintain and analyze Housing Credit cost data, 2) the IRS should require general contractor cost certifications for Housing Credit projects to verify consistency with developer cost certifications, 3) the IRS should encourage more standardization of cost data, and 4) the IRS and Treasury Department should communicate to state Housing Credit allocating agencies how to collect information on and review Housing Credit syndication expenses, including upper-tier partnership expenses.
Earlier this month, NCSHA issued an analysis based on independent research from Abt Associates and other data on construction costs, which finds that, on average, Housing Credit development costs are roughly the same as development costs for typical multifamily apartments, despite the additional federal requirements that Housing Credit developments are subject to. Citing an inability to collect market-rate data, the GAO report does not compare Housing Credit development costs to market-rate development costs. NCSHA has prepared a side-by-side comparison of the GAO report and the Abt Associates study.
With a more than 30-year track-record as a successful public-private partnership, the Housing Credit is our nation’s most productive tool for developing and preserving affordable rental housing. However, more than 11 million households still spend more than 50 percent of their income on rent, leaving too little for other necessities like transportation, medical care and healthy foods.
ACTION believes that the most important thing Congress could do to strengthen the Housing Credit would be to enact the Affordable Housing Credit Improvement Act (S. 548 / H.R. 1661), bipartisan legislation that would expand the Housing Credit, streamline program administration, and improve our ability to use this critical resource to preserve at-risk affordable housing and help vulnerable populations.
Visit the Advocacy Toolkit for more information about the Housing Credit and resources to advocate for the Affordable Housing Credit Improvement Act.