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What can the Treasury Department do to expand public and community ownership of rental housing? (December 2023)

by

Philip Tegeler and Audrey Lynn Martin1

Introduction

The United States is experiencing a housing crisis as Americans face a shortage of affordable housing supply and rapidly increasing housing costs. Far too many individuals and families across the country face housing insecurity, homelessness, and unsustainable rental burdens. In response to these challenges, a national housing movement has emerged to expand the social housing sector and move away from for-profit housing. These principles are rooted in the belief that housing is a human right rather than a commodity.2 The social housing sector is not any single financing structure but includes public housing, community land trusts and related tenant cooperative models, and other forms of non-profit or community housing ownership and management.3

The social housing movement has gained momentum in recent years, particularly as Americans face increasingly unaffordable, unsustainable rent burdens and the COVID-19 pandemic. This housing movement has urged a shift in how housing is built, owned, and operated so that the right to housing can one day be secured for all. Support from existing federal programs can play a crucial role in expanding social housing and moving away from for-profit housing models to support low-income families. In a previous policy brief,4 we explored the role that the U.S. Department of Housing and Urban Development (HUD) can play in supporting the social housing sector. We now expand upon that policy exploration to discuss what actions the U.S. Department of the Treasury can take to further social housing principles and goals.

The Treasury Department has a significant impact on housing development through the Low-Income Housing Tax Credit (LIHTC) program, the Community Development Financial Institutions (CDFI) Fund, and the Capital Magnet Fund. Opportunity Zones are another tool that Treasury can use to influence affordable housing development and potentially expand community ownership. This policy brief will explore how the Treasury Department might play a larger role in supporting social housing.

The Low-Income Housing Tax Credit Program

The Low-Income Housing Tax Credit (LIHTC) program is the single largest source of federal funding for affordable housing in the United States.5 LIHTC was first authorized in 1986 and helped finance more than 3.4 million housing units between 1987 and 2020.6 LIHTC is administered jointly by the U.S. Department of the Treasury and state housing finance agencies (HFAs). The Internal Revenue Service (IRS) allocates tax credits to states, and state HFAs use qualified allocation plans (QAPs) to outline the criteria used to select which projects will be awarded tax credits. Owners or developers of a project typically partner with investors who receive tax credits in exchange for equity investments to finance construction. Selling tax credits to investors allows developers to borrow less money for construction and charge lower rents. LIHTC projects are required to remain affordable for 30 years, though some states impose affordability requirements longer than 30 years.7 The LIHTC program is a potential vehicle for social housing if long-term or permanent affordability can be guaranteed.

View the full brief here.

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  1. Philip Tegeler is the Executive Director of PRRAC, and Audrey Lynn Martin is PRRAC’s Housing Policy Counsel. The authors are grateful for the research assistance of Jessica Mugler, PRRAC Law and Policy Intern, and the contributions of Peter Kye, formerly Housing Policy Counsel at PRRAC. We have also benefitted along the way from the insights of numerous colleagues, including Nina Janopaul, Carmen Romero, Dafina Williams, Bobby Rozen, Kalima Rose, Luke Villalobos, and our partners in the Alliance for Housing Justice. However all opinions and errors in this report are our own.
  2. The Alliance for Housing Justice has published a set of defining principles for social housing in the U.S. at https://www.allianceforhousingjustice.org/us-social-housing-principles.
  3. Chew, Amee, Social Housing For All: A Vision For Thriving Communities, Renter Power, and Racial Justice, The Center for Popular Democracy (March 2022) https://www.populardemocracy.org/sites/default/files/Social%20Housing%20for%20All%20-%20English%20-%20FINAL%203-21-2022_0.pdf
  4. Tegeler, Philip, “What can HUD do to expand public and community ownership of rental housing?” Poverty & Race Research Action Council (April 2021) https://prrac.org/pdf/hud-social-housing-2021.pdf.
  5. U.S. Government Accountability Office, Low-Income Housing Tax Credit: The Role of Syndicators (Feb. 16, 2017), https://www.gao.gov/assets/gao-17-285r.pdf
  6. HUD office of Policy Dev. And Research, Low-Income Housing Tax Credit: Property Level Data https://www.huduser.gov/portal/datasets/lihtc/property.html
  7. See “Social Housing Goals in State Housing Allocation Plans – a 50-State Survey” (PRRAC, 2023), https://www.prrac.org/pdf/Treasury-social-housing-2023.pdf