The Low-Income Housing Tax Credit Program: A Performance Update Analysis
We sometimes refer to the low-income housing tax credit (LIHTC) as a housing program hiding inside an Internal Revenue Code section. The housing credit statute, Section 42, has now been a feature of the code for nearly 28 years making it the longest lasting federal housing program.
Despite its positive track record, CohnReznick has undertaken a long term effort to measure the economic performance of housing tax credit projects. By economic performance we refer to how well housing credit properties are faring based on the traditional real estate metrics - occupancy, debt coverage ratio (“DCR”) and per unit cash flow. In addition, we assess whether investors are achieving the investment yields they have been promised and take a hard look at properties that are under-performing.
Our most recent study is the third in a series of periodic reports issued by CohnReznick that address the performance of properties financed with federal low-income housing tax credits and funds organized to own interest in housing tax credit properties.
Data for 18,000 properties was contributed by 32 syndicators and three direct investors. Collectively, they represent
- $76 B of equity investment and $80 B total housing credits
- 70% of all “actively managed” LIHTC properties in the market - 1.4 M total units
- 85% are stabilized properties
The 2011-2012 operating data for a subset of more than 15,588 stabilized properties was analyzed. The analysis covered all 50 US states, the District of Columbia, Guam, the U.S. Virgin Islands, and Puerto Rico.
- Physical Occupancy - Occupancy rates have increased across the country since 2009
- Debt Coverage Ratio - Improved financial performance continues. All states and territories are operating at or above breakeven.
- Per-Unit net cash flow - Cash flow has continued to improve, doubling over the last six years
- 4% properties performed on par with 9% properties
- Senior properties outperformed the overall portfolio by all measures in 2011 to 2012 (occupancy, DCR and per-unit cash flow).
- Only 18.6% of properties operated below 1.00 DCR in 2012; as recently as 2002 this figure was 35%.
- Larger properties (101-200 units/property) had the lowest incidence of underperformance
- Financial performance was most influenced by geographic location
- The national inventory of housing credit properties continues to perform well across every type of project – large or small, urban, rural or exurban.
Additional Report Materials
Video: The Low-Income Housing Tax Credit Program: A Performance Update Analysis
Infographic: The Low-Income Housing Tax Credit Program: A Performance Update Analysis (November 2014)
- LIHTC Program at Year 25: An Expanded Look at Its Performance
- Special Report: The Community Reinvestment Act and Its Effect on Housing Tax Credit Pricing