CohnReznick publishes major study on Housing Tax Credit Property Performance

November 15, 2021 (New York, NY) – CohnReznick, one of the top advisory, assurance, and tax firms in the country, and a national leader in affordable housing, today announced the publication of its 2021 Affordable Housing CRedit Study.

The study is the latest in a biennial series of reports tracking the performance of affordable housing properties financed with federal low-income housing tax credits (LIHTCs). It provides affordable housing investors, syndicators, and developers with comprehensive data, analysis, and insight into critical performance trends across a surveyed portfolio gathered from more than 30,000 housing tax credit properties.

Dedicated to retired CohnReznick principal Fred Copeman, who passed away earlier this year and founded the study in 2002, the 2021 Affordable Housing CRedit Study demonstrates, among many things, the resilience of the affordable housing industry despite the challenges of the COVID-19 pandemic.

In March 2021, CohnReznick submitted data requests to all active housing credit syndicators known to the firm and to the nation’s largest direct housing credit investors (investments made by a single corporate investor directly into a project partnership). 

Key Findings and Highlights

• The housing credit program produced approximately 130,000 affordable rental homes annually in 2019 and 2020, per CohnReznick estimates. No other local, state, or federal program came close to this level of production.
• Most properties financed with housing tax credits are fully occupied, with healthy financial performance and extremely low foreclosure rates. In 2020, the surveyed stabilized properties reported, on a median basis, 97.7% physical occupancy and 1.52 debt coverage (the ratio of net operating income over must-pay debt).
• As of year-end 2020, only about 10% of properties were on the “watch lists” of our data providers, who generally follow criteria adopted by the Affordable Housing Investors Council (AHIC) as a baseline for measuring underperformance. CohnReznick had expected the percentage of watch list properties to be higher due to added challenges from COVID-19. Interestingly but not surprisingly, properties in lease-up or construction as of December 2020 reported higher-than-average watch list percentages of 24% and 15%, respectively.
• Respondents to the survey reported a 0.57% cumulative foreclosure rate, including only one new foreclosure reported in 2020. This remained consistent with the historically low number of housing tax credit properties that have fallen victim to foreclosure and attributable to the few housing tax credit properties that suffer from significant underperformance.

“Our analysis in the 2021 CRedit Study shows what we have always believed to be true: The ongoing need for affordable housing and the superb manner in which most of these properties are managed create a stable financial opportunity for institutions investing in housing credits,” notes Cindy Fang, Partner and Tax Credit Investment Services Leader. “In the face of the global pandemic, the affordable housing community – developers, investors, syndicators – achieved near-normal returns throughout the surveyed period despite the realities of lockdown and modest increase in uncollected rents.”

Beth Mullen, CohnReznick Affordable Housing Industry Leader, adds, “With Congress’s passage of the infrastructure bill, and with other legislation pending that could boost production of LIHTC-financed housing, there is strong optimism for the future of the industry in the months and years ahead. Despite a global economic and social crisis, the housing credit program has proven to be incredibly resilient, with performance metrics remaining very strong and production largely uninterrupted.”

In addition to the study, CohnReznick also released its complementary dataset called the Affordable Housing CRedit Tool. Users can access interactive data through an online interface providing the most recent data. Together, the Affordable Housing CRedit Study and CRedit Tool can be used by the affordable housing community to benchmark portfolios, develop best practices, and gain further insights into the industry.