Capitol Connection: Housing Credit Total Development Costs: The GAO Weighs In
If you have been around the Housing Credit and Bond Program for some time now, you are likely familiar with the Governmental Accountability Office (GAO). Through the years, the GAO has been commissioned by Congress numerous times to report and investigate the program on a number of policy issues.
In fact, the GAO has been referred to as "The Congressional Watchdog" for its frequent audits that have uncovered inefficiency in government. News media often draw attention to the GAO's work by publishing stories on the findings, primarily because of the GAO’s reputation as the supreme audit institution of the federal government.
This week, after months of waiting and wondering, the GAO published a report on Housing Credit development costs: Low Income Housing Tax Credit: Improved Data and Oversight Would Strengthen Cost Assessment and Fraud Risk Management. The report is the third major study in a series of reports that the GAO has conducted in recent years related to the Housing Credit. Development costs of housing credit projects placed in service between 2011 and 2015 in 10 states were examined, as well as the project characteristics that impacted those costs.
In this most recent report, the GAO found that the median total development per unit cost (TDC) in its 10-state survey was approximately $204,000. However, in a recent independent report commissioned by NCSHA that was conducted by Abt Associates, the median total development cost result was $165,000 per unit. Why the difference? The GAO study includes some of the highest cost areas of the United States, while the Abt study was nationwide and includes 4% Housing Credit properties as well as 9% properties.
As we all know, the affordable housing community does an incredible job producing quality housing while at the same time trying to control costs. With labor, material costs, and land prices escalating, it is a struggle that will continue. Allocating Agencies addressed the cost issue back in 1993 when NCSHA issued best practices to the states, the same year that President Clinton made the program a permanent expenditure in our tax code. And now the latest GAO report states that most states have set cost limits and have policies and incentives in their Qualified Allocation Plans to control development costs.
A review of the Housing Credit process by the GAO always yields important information for ensuring success of the program, and we should always take their recommendations seriously. Among those recommendations, we support independent general contractor cost certifications as a continued step toward transparency and continued bi-partisan Congressional support of the Housing Credit. As always, we will continue to monitor industry observations of this report and offer commentary on this and other issues.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.