Bipartisan Support for LIHTC Doesn't Mean Either Party Really Cares About Affordable Housing

 The consensus is: ¯\_(ツ)_/¯(cnbc)

The consensus is: ¯\_(ツ)_/¯(cnbc)

Last week the Senate Finance Committee held a hearing on a proposal to “improve” the Low-Income Housing Tax Credit (LIHTC), which is the only federal program expressly dedicated to the construction of affordable housing. The program has funded 90%  (around 3 million units) of any such projects over the last 30 years. Part of its touted success is how it has maintained broad bipartisan support in Congress over that period, which is also true of the bill being considered at the moment.  In an era where “bipartisan support” is a seen as a bad thing in many circles if it’s seen at all, this is no small feat. However, don’t confuse support for LIHTC with support for affordable housing.  Both parties are failing to address the affordable housing crisis.

I want to be clear, despite my many concerns with it, the LIHTC is mostly a fine program for what it is designed to do – encourage construction of new low-income housing by subsidizing developers’ costs.  The proposals to update the program, made more urgent by the potential for large tax reform that could undermine the program, are also fine, as far as they go.

The bigger problem is that LIHTC is basically the only federal affordable housing policy (Section 8 vouchers is a much smaller program), which is very bad.  99.9% US counties don’t have enough affordable housing. 11.4 million Americans are severely rent burdened.  75% of Americans who qualify for housing assistance don’t receive any.  Several million Americans are housing insecure or homeless.  The drain on our economy and the stress on our society are staggering.

 If LIHTC has been the only program at the federal level that addresses affordable housing construction, and we’re in the midst of a crippling nation-wide affordable housing crisis, then the program is obviously failing by a wide margin. That shouldn’t be a controversial statement.

But no one is saying it.  The testimony at the Senate Finance Committee was from a wide range of developers, advocates, and policy wonks.  They all spoke passionately and knowledgeably about the affordable housing crisis and about how important LIHTC is to addressing it. I don’t doubt the sincerity and expertise of anyone involved in the process. But the narrow focus of this hearing ignores the larger questions that we should be asking these experts and advocates.

There is a slow moving unnatural disaster in our country and our bipartisan answer is not actually an answer.  Even if the new proposal is enacted, it is estimated that it will create about 1.3 million units over 10 years (an addition of 400,000 units).  We need 7.4 million units just for extremely low-income Americans.  How does anyone think LIHTC is working if that’s the known and accepted gap?

What else could we be doing? Could we suggest radically expanding LIHTC or radically redesigning it? Could we be radically expand and rethink Section 8 vouchers or mandate that they must be accepted everywhere? Could we also expand public housing funding rather than keep undermining it? Could we be introducing alternative models like community land trusts and SROs at the national level?

The urgency and relentlessness of the crisis demands bold thinking and honest self-assessment.  Accepting the premise that LIHTC is the best answer that only needs a few marginal tweaks is a failure of public duty and intellectual honesty.  Our representatives need to represent all ideas that could help the affordable housing crisis. Housing experts and advocates need to take advantage of a rare opportunity like a Senate hearing to challenge every premise and assumption. That wasn’t what happened this week.

It is a simple truism in politics that when both parties own an issue, no one owns it.  By creating a large program like LIHTC that accepts basic market-principles but has an ostensibly low-income focus, both parties can sign off on it comfortably.  When housing comes up as a political issue, which is rare, both parties can point to their support of LIHTC to show that they are “good on housing” even though the program falls well short in practice.

This political reality is why no one challenges the premise that LIHTC is a great policy tool or that it can address the affordable housing crisis alone.  The truth is, neither party has an answer for the affordable housing crisis. Instead, they both have accepted the same flawed market premises about housing as an asset rather than a basic right. 

Both have also so thoroughly bought into the myth of promoting homeownership that neither has a policy infrastructure or donor constituency outside of that (it will be fascinating to see if rumors of reducing the Mortgage Interest Deduction will actually materialize during the tax reform debate).  It is much easier to hold up the LIHTC to show that you are doing something and shrug about how it’s the best you can do under the circumstances.  It is much harder to admit that LIHTC is not working and that he accepted policy framework on housing is not enough.

On that last point, I’ve had conversations with folks that defend the program by saying it’s not intended to be the only solution.  But again, where are the other solutions? The oxygen in housing policy gets sucked up by LIHTC and until that changes, we’ll keep accepting that this is the best we can do.  We’ll keep allowing both parties to point to an obviously inadequate policy and let them off the hook. We’ll keep boiling in the affordable housing crisis by accepting a deeply flawed premise about the nature and purpose of housing.  This is not good enough.