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What published studies show (citations below):  

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• LIHTC developments are most successful in low-income, high poverty areas, where they have the potential to raise property values (with the opposite effect in higher-income areas, which showed price declines of approximately 2.5 percent in a 2016 Stanford Business School study).

• Harvard and Wharton economists Edward Glaeser and Joseph Gyourko have argued that the “LIHTC is not very effective along any important dimension—other than to benefit developers and their investors."

• LIHTC attracts low-income households while deterring higher-income families; the program is not proved to be effective at creating mixed-income neighborhoods.

• The Congressional Budget Office has written, “the tax credit may allow investors to capture much of the benefits for themselves rather than their tenants.”

• An analysis by Missouri’s state auditor of the state’s own LIHTC found that it was “costly and inefficient.” The auditor estimated that “only $0.35 of every tax credit dollar issued is actually used to build low income housing.

• A CATO Institute report detailed how government officials can and have abused the LIHTC program for personal gain. Because the states receive a limited amount of valued credits that are handed out in a discretionary manner to developers, it creates an open invitation to corruption.  Examples include:

  • In a 2016 scandal, the California state treasurer helped steer millions of dollars in tax credits to multiple chosen developers that donated tens of thousands of dollars to his campaign for governor.

  • In Glendale’s 2009 City Council election, nearly one of every four dollars received by the top four candidates—more than $100,000—came from a developer who had helped build four affordable‐​housing projects there. Officials there believe roughly $15M was lost because of fraud.

  • In 2010, LIHTC was at the center of the largest public corruption case ever broken in Dallas. Fourteen people were convicted of bribery, extortion, and related crimes, including developers, a state representative, the Dallas mayor pro tem, and the city planning commissioner.  The core corruption involved the mayor pro tem and the planning commissioner shaking down developers for bribes in return for approving housing tax credits and zoning changes. The mayor pro tem was sentenced to 18 years in prison, while the planning commissioner received 14 years.

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The CATO Institute summarizes LIHTC as follows: "LIHTC projects are complex, expensive, and they encourage local government corruption. Housing affordability is a serious problem in many cities, but regulatory reform is a better way to address the challenge. Such reforms can be pursued by state and local governments without federal tax subsidies."

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Sources:

• State of Washington, Department of Commerce, “Affordable Housing Cost Study,” September 2009, p. 13.

• Michael Eriksen, “The Market Price of Low‐​Income Housing Tax Credits,” Journal of Urban Economics 66, no. 2 (2009): 141–49.

• Urban Land Institute, “Bending the Cost Curve on Affordable Rental Development: Understanding the Drivers of Cost,” 2013.

• Government Accountability Project, “Low‐​Income Housing Tax Credit,” GAO-17–784T, August 1, 2017.

• Edward L. Glaeser and Joseph Gyourko, Rethinking Federal Housing Policy (Washington: AEI Press, 2008), p. 11.

• Gregory S. Burge, “Do Tenants Capture the Benefits from the Low‐​Income Housing Tax Credit Program?” in Real Estate Economics (Blackwell Publishing Inc., December 2010), p. 95.

• Ed Olsen, “Does Housing Affordability Argue for Subsidizing the Construction of Tax Credit Projects?” 2017. Presented at a conference at the American Enterprise Institute, April 6, 2017.

• Missouri State Auditor, “Tax Credit: Analysis of Low Income Housing Tax Credit Program,” April 2008, p. 3.

• Park, S.; Yang, A.; Ha, H.J.; Lee, J. Measuring the Differentiated Impact of New Low-Income Housing Tax Credit (LIHTC) Projects on Households’ Movements by Income Level within Urban Areas. Urban Sci. 2021, 5, 79. 

• Baum-Snow, N., & Marion, J. (2009). The Effects of Low Income Housing Tax Credit Developments on Neighborhoods. Journal of public economics, 93(5-6), 10.1016/j.jpubeco.2009.01.001. 

• David Zahniser and Shashank Bengali, “L.A. Developers Accused of Stealing Millions in Affordable‐​Housing Scheme,” Los Angeles Times, February 6, 2016.

• Chrisian Britschgi, “California Gubernatorial Candidate Steered Low‐​Income Housing Funds to Campaign Contributors,” Rea​son​.com, August 15, 2017.

• Edwards, Chris and Brown Calder, Vanessa. "Low-Income Housing Tax Credit: Costly, Complex, and Corruption-Prone." Tax and Budget Bulletin No. 79.  November 13, 2017.

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