By: Sophie Fields

In many high-poverty communities, the challenges often perceived as “struggles” by those in more affluent circumstances are a product of limited access to adequate funding and opportunities. Moreover, it’s important to recognize that there are rarely one-size-fits-all answers to systemic issues such as lack of affordable housing. Specifically, the implementation of Low-Income Housing Tax Credits (LIHTC) in communities create significant opportunities and pitfalls for affordable housing. The Low-Income Housing Tax Credit program began in 1986.[1] LIHTC is a federally funded feature of affordable housing used in the United States.[2] It is the largest source of affordable housing in the United States.[3] LIHTC funding is used to create housing for people who are below median income levels, elderly, have disabilities, or are simply houseless due to life circumstances. The LIHTC program works through the tax credits assigned to each state in differing amounts. The tax credits then are given to developers to incentivize them to create designated housing for people whose income falls 50-60% below the average median income level.[4] This, in turn, increases available housing in an area.[5]

A new issue has arisen in recent years concerning LIHTC and affordable housing.[6] Specifically, some communities have taken issue with the ways state-wide agencies choose to allocate the LIHTC credits themselves.[7] Some states choose to use more of their LIHTC credits in low-income communities, where other states choose to allocate a larger proportion of their credits in higher-income neighborhoods.[8] Proponents of concentrating housing credits in lower income areas argue that low-income communities have value unseen by critics and need the continuing financial support of affordable housing programs like LIHTC.[9] Those who advocate for more credits being allocated in low-poverty areas argue that it ensures better outcomes for children of low-income households, are safer environments for families to live in and promote integrationist housing policies.[10]

I argue that state agencies who are in charge of administering LIHTC credits must shift their primary focus on development to predominantly funding low-income areas, rather than choosing the high-income areas to place more credits in in an effort to “mobilize” individuals to those areas for opportunities. Low-income areas may not have as much access to the opportunities that wealthier areas have by nature of investment interest: opportunities such as well-funded schools, greater employment access, safer housing environments.[11] What these areas do have are communities of people living in them, however, who are connected to one another. People who live in low-income communities, however pedantic it sounds to reiterate, have shared experiences, are part of families and networks of friends that remain valuable to them.[12] These networks are very much the same as the networks people living in affluent communities share. In other words, there is significant cultural capital that remains in low-income areas. Furthermore, where affordable housing integrationists oppose place-based affordable housing policies, they choose to ignore a distinct social capital that unequivocally exists in these areas. Legal scholar Lisa T. Alexander explains the social capital in lower income areas is formed through social relations and ties that are valuable, and affect their opportunities and life chances.[13] Alexander has coined the term “Cultural Collective Efficacy” as a term that illustrates the missed capital in low-income areas.[14] She defines cultural collective efficacy as an “important type of positive social capital that exists in some low-income, segregated urban neighborhoods,” based off of a term “collective efficacy” created by social scientists to describe the ability of neighborhoods to realize common goals and also engage in collective action.[15] Alexander’s term defines a likely cultural benefit members of a low-income community may share that is overlooked by those who oppose supporting housing through LIHTC in these areas. Choosing to only invest in areas that are wealthier at the expense of lower income areas ignores that social capital, and also forces those lower-income families and individuals who must move to the newer areas for the housing to start from ground zero if they do not have social ties in the new area.[16] Employing a solely integrationist mindset in planning how to allocation LIHTC in a beneficial way ultimately narrows down to prioritizing areas in which policymakers and general communities see as valuable. This thinking leads to tunnel vision on where opportunity and money lie, which are important factors to assist individuals in gaining stability.[17] However, this thinking ignores the cultural and social networks they may have in the areas they already reside in.[18]

State agencies are major policy-making entities in context of LIHTC decisions. They design the plans, called “Qualified Action Plans” (QAP) that distribute the credits themselves.[19] At the point of designing these QAP, these agencies have mostly unrestricted freedom to allocate the credits wherever they want to, and prioritizing whichever components their states choose to hold as important.[20] This is the point in which I argue state agencies can make a difference through their allocations. Agencies can focus on solutions and implementing new strategies to inform their allocation decisions, to encourage a more balanced approach that does not favor the credits being bulked in in affluent areas at the expense of low-income communities. The bottom line here for state agencies: balancing populations and locations, taking in data and learning from it, and overall, listening to the communities themselves. Again, there is no one-size fits all approach here. Blue Green Alliance, a non-profit organization that conducts research on environmental challenges and economic opportunities in America, suggests tenant demographic reporting as a part of compliance.[21] Making actual changes that will positively affect communities will involve further, more concrete strategies to confront making QAPs: community engagement, needs based planning, better data, understanding systemically how these issues are perpetuated. One of the ways to make change is to merely continue to fund low-income communities state by state. One idea for agencies to keep in mind are minding the regional variations present in an area that may affect residents in low-resourced areas. An example brought up by Kara Brodfuehrer and Renee Williams were comparing the differing commute times in California as a factor the state used to initially plan their LIHTC allocations.[22] The CA state agencies factored in commute times and job proximity as primary indicators of opportunity in a given area.[23] However, once advocates pointed out that longer commute times, in rural areas particularly, are “inevitable” because of these jobs being in the agricultural industry, the indicators were removed from California’s plan as indicative factors.[24]

Another factor states should use in their QAPs to move towards a more equitable approach is placing an emphasis on new construction and preservation in urban, low-income areas that have only received preservation efforts from affordable housing programs. These areas are sometimes lacking in the actual amount of sustainable affordable housing available to community members. States should conduct research, interviews and make concerted efforts to find out which low-income communities have the highest need for new construction of units. The needs of a community may range from actual numbers of housing stock needed, type of housing (multi-family or single-family), or housing for a specific subset of a population: elderly, disabled individuals, etc. As agencies begin to approach creating their QAPs less as a one-size-fits-all plan, and moreso a tailored, needs-based approach, they will find more success in the long-term effects of the LIHTC credits being utilized in communities. In a study completed by Nathaniel Baum-Snow and Justin Marion, the implementation of new LIHTC units in a neighborhood led to a “positive amenity affect” in an area.[25] This meant higher housing values in neighborhoods that were considered to be declining as well as neighborhoods considered stable.[26] This positive amenity affect is just one example of a factor that benefits communities who are re-invested in through LIHTC.

Overall, developers may build new units in affluent areas in efforts to affirmatively further desegregation efforts and create spaces in opportunity-laden areas for low-income individuals, so long as they continue to give at least as much effort (if not more) to the low-income communities that need the support of the program. The agencies may still meet the preferences laid out in QAPs by building units in “economically depressed’ areas and avoid concentrating all units in racially segregated areas. Race and class play a large role in these decisions, and agencies must heed what individuals who are eligible for LIHTC housing truly need. What individuals need in a housing location or a development itself varies from area to area. If state agencies make a concerted effort to listen, research, and take note of the needs of the very individuals they will serve, the LIHTC program’s goals are more easily attained. Through this approach, the value that lies in low-income areas and the people that live in them can begin to be acknowledged through the LIHTC program.

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[1] 26 U.S. § 42

[2] Id.

[3] US Gov’t Accountability Off., GAO-24-107064, Low-Income Housing Tax Credit: Opportunities to Improve Oversight 1-2 (2023).

[4] Id.

[5] Id.

[6] See Thomas B. Edsall, Opinion, Where Should a Poor Family Live?, N.Y. TIMES, Aug. 5, 2015, https://www.nytimes.com/2015/08/05/opinion/where-should-a-poor-family-live.html.

[7] See id.

[8] See id.

[9] Id.

[10] Barbara Sard & Phillip Tegeler, Children and Housing Vouchers, NYU Furman Center (Oct. 2014), https://furmancenter.org/research/iri/essay/children-and-housing-vouchers.

[11] See Edsall, supra note 6.

[12] Lisa T. Alexander, Hip Hop and Housing: Revisiting Culture, Urban Space, Power, and Law, 63 Hastings L.J. 803, 810 (2011).

[13] Id.

[14] Id.

[15] Id. at 825-826.

[16] See id. at 816-820.

[17] Id.

[18] Id. at 825-826.

[19] 26 U.S. § 42

[20] Id.

[21] Jeff Hurley & Gabby Davis, BlueGreen All. Found., Building a Better Affordable Housing Future 28 (2023).

[22] Kara Brodfuehrer & Renee Williams, When Opportunity Knocks, 27 J. of Affordable Hous. and Cmty. Dev. L. 67, 67-86 (2018).

[23] Id.

[24] Id.

[25] Nathaniel Baum-Snow & Justin Marion, The effects of low income housing tax credit developments on neighborhoods, 93 J. of Pub. Econ., 654, 654-666 (2009).

[26] Id.