Financing Affordable

Affordable housing, affectionately known as housing projects, until the late 1960s was built and managed directly by the government.  However, pockets of concentrated poverty, costly maintenance and high crime rates produced in these housing projects lead to the decision to find a different way.  The government stopped building directly and by the late 1990s many of those housing projects had been demolished.  Two of the largest projects were razed in Lexington during the 1990s, the Charlotte Court projects off Georgetown St. and the housing projects around Breckenridge St and Race St.   Although different affordable housing was built to replace those units lost in those areas, they were financed differently.  Some of those homes were made available to low income households to purchase.  Other units were built by developing a partnership between public funding and private developers using Low Income Housing Tax Credit (LIHTC).

The LIHTC process involves housing developers obtaining from the government these tax credits.  They then ‘’sell’ those credits to banks for cash to build.  Most of these housing developers are for profit companies.  The LIHTC process has been a booming business and as often happens in capitalism as ‘middle man’ entered the picture.  Syndicators developed to obtain the credits from the government and then ‘sell’ the credits to the developers.  Affordable housing was being produced and people were making a profit.  The apartment complexes are nice and offer amenities that were not seen in housing projects.  However, only 4% of those housing units were available for those having the least income.  It is interesting to note that developers building a twenty million dollar complex made two million on fees alone.  Over the last 20 years the number of affordable housing units being developed with LIHTC has been declining, while the cost of development has been increasing.  The IRS is the agency responsible for oversight of LIHTC, yet often state based nonprofits are tasked with management of the funds.  According to an NPR article, there have been only 7 audits since the program's inception in 1986.   Here is a link to the article: https://www.npr.org/2017/05/09/527046451/affordable-housing-program-costs-more-shelters-less

A different model is needed to produce truly affordable housing for individuals and families living at 50% of median income.  Even affordable housing supported by LIHTC makes rent a cost burden for them.  

 Gleanings Housing Pages, no. 6, July/August 2021