Comparing the Efficiency and Equity Advantages of Low Income Housing Tax Credit Program (LIHTC) with Section 8
Voucher Program---- A Regional Difference
Lan Deng
Dept. of City and Regional Planning
University of California at Berkeley
Research Question
How should limited government housing subsidies be directed
– via supply-side investment programs such as public housing or the LIHTC program?
– or by demand-side programs like housing vouchers?
Two Sets of Evaluation Criteria
Which approach is better at providing quality neighborhoods and economic opportunity to low-income families?
Which approach is more efficient in terms of lifetime costs?
Organization Of This Presentation
Case Study Identification and Data
How the LIHTC differs by MSAs
Comparison of Spatial Outcomes (LIHTC vs TB-Section 8)
Comparison of Cost Effectiveness (LIHTC vs TB-Section 8)
Case Study Regions
Four case study regions: Tight Markets: San Jose PMSA, Boston PMSA
Balanced Markets: Miami MSA, Cleveland PMSA
Differences among these regional housing markets:
Growth difference
New regions vs. established regions.
Difference in the severity of housing segregation and discrimination
Data for this Research
LIHTC Database, collected from the following state agencies:Florida Housing Finance Corporation Ohio Housing Finance AgencyCalifornia Tax Credit Allocation Committee Massachusetts State Dept. of Housing and Community Development
Dataset 1: General Project Information for all LIHTC projects in each region from 1987 to 2000.
Dataset 2: Financial Structure, Unit Composition, Rent Information for available projects, extracted from a project’s Final Cost Certification File or Underwriting Reports etc.
How Many LIHTC Projects? Where?
Dataset 1: General Project Information (used
for spatial analysis)
Dataset 2: Project Financial Information
(used for cost analysis)
No. of Projects No. of Projects
Miami, FL 126 29
Cleveland, OH 131 29
San Jose, CA 96 66
Boston, MA 210 51
Region
Other Data Sources
Section 8 Voucher / Certificate Data, from A Picture of Subsidized Households in 1998, HUD
1990 and 2000 census data, Summary Tape File 3
Public school performance data, from the Education Department in individual state.
Also,Fair Market Rent and Area Median Family Income, HUDR.S. Mean’s Historic Construction Cost Index;Historic 30-year conventional mortgage rate from Federal Reserve
Bank
Miami vs. Cleveland: For-profit New Construction dominates in Miami. It’s the opposite in Cleveland.
New Construction
Acquisition & Rehabilitation
Both NC and A/R
For-profit
8
36
31
43
3
Nonprofit
For-Profit
Miami
18
15
37
43
16
Forprofit
Nonprofit
Cleveland
San Jose vs. Boston: New Construction dominates in San Jose, the opposite in Boston.
Non-profits dominate in both.
New Construction
Acquisition & Rehabilitation
Both NC and A/R
For-profit
658
5
26
43
Nonprofit
Forprofit
Developer Unknown
San Jose Boston
23
20
13
335
51
20
Forprofit
Nonprofit
Developer Unknown
Nonprofit
Development costs vary widely by region, with Miami at the low end and Boston at the high end.
(Dollar in 1996 Value)
76,815
50,197
89,580
72,504
130,999
103,394
167,727
109,671
0
40,000
80,000
120,000
160,000
200,000
Pro
ject
Cos
t per
Uni
t
Miami Cleveland San Jose Boston
New Construction Acquisition / Rehabiliation
Comparison of Spatial Outcomes (LIHTC vs Tenant Based Section 8)
Neighborhood Income Neighborhood Racial Composition School Quality
Except for San Jose, most of LIHTC and Section 8 units are located in very low income and low
Income neighborhoods
0%
20%
40%
60%
80%
100%
LIHTC Section 8 LIHTC Section 8 LIHTC Section 8 LIHTC Section 8
% o
f Uni
ts
Very Low Income Neighborhoods Low Income Neighborhoods
66%
75% 77%73%
27%32%
75%
49%
Miami Cleveland San Jose Boston
Tenant-based Section 8 program not always works better than LIHTC program in bringing low income
families to middle income neighborhoods
26%
8%
14%12%
9%11%
18%
21%
0%
10%
20%
30%
Miami Cleveland San Jose Boston
LIHTC Section 8
% of Units in Middle Income Neighborhoods
(Except for Boston) similar proportions of assisted families are located in the most segregated
neighborhoods, regardless of program type.
12%
53%
29%
3%10%
50%
11%6%
0%
20%
40%
60%
Miami Cleveland Boston San Jose
% o
f Uni
ts
LIHTCSection 8
Ghettos: over 80% are blacks over 10% are blacks
In Miami, 80% of LIHTC units are proximate to low-quality schools, vs. 51% of Section 8 units
(Quality is standardized according to the average metropolitan school performance scores)
-
20
40
60
80
100
-4 -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2Standardized School Performance Score
Cumulative % of V/C Units
Cumulative % of LIHTC Units
The Cumulative School Quality Distribution of LIHTC Units and Section 8 Voucher/Certificate (V/C) Units in Miami MSA
Metropolitan Average
In Cleveland, 70% of both LIHTC units and Section 8 units are proximate to low quality schools, but more
LIHTC units close to the worst schoolsThe Cumulative School Quality Distribution of LIHTC Units and
Section 8 Voucher/Certificate (V/C) Units in Cleveland MSA
-
20
40
60
80
100
-2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Standardized School Performance Score
Cumulative % of V/C Units
Cumulative % of LIHTC Units
Metropolitan Average
In San Jose, the school quality distribution of LIHTC units and Section 8 units are very similar
0
20
40
60
80
100
-3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2Standardized School Performance Score
Cumulative % of V/C Units
Cumulative % of LIHTC Units
The Cumulative School Quality Distribution of LIHTC Units and Section 8 Voucher/Certificate (V/C) Units in San Jose MSA
Metropolitan Mean
In Boston, 80% of LIHTC units are proximate to low quality school, vs. 60% of Section 8 units
The Cumulative School Quality Distribution of LIHTC Units and Section 8 Voucher/Certificate (V/C) Units in Boston MSA
-
20
40
60
80
100
-3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2Standardized School Performance Score
Cumulative % of V/C Units
Cumulative % of LIHTC units
Metropolitan Average
Comparison of Cost Effectiveness (LIHTC vs Tenant Based Section 8)
Average Development Subsidy across Regions
Development Subsidy vs. 30-year Voucher Subsidy
The Subsidy Story in Dollars: The required subsidy in Boston is more than twice what is in Miami.
(New Construction Projects in the Late 90s.)
$58,596
$68,239
$85,920
$124,200
Miami
Cleveland
San Jose
Boston
Total Development Subsidy Per Unit ( in 1996 Dollars)
56% of TDC
67% of TDC
74% of TDC
68% of TDC
TDC: Total Development Cost
In Boston and Cleveland,the LIHTC development subsidy is greater than 30-year Section 8 voucher
subsidy, but the opposite holds in San Jose and Miami.
1.40
0.89
0.72
1.21
0.00 0.50 1.00 1.50 2.00
San Jose
Miami
Cleveland
Boston
Mean Ratio of Total Development Subsidy over 30-Year Voucher Subsidy
In Miami, projects targeting larger family units tend to be more cost effective
(New Construction Projects in the Late 90s)
-
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00
A Project's Average Unit Size (No. of Bedroom Per Unit)
Co
st E
ffec
tive
nes
s R
atio
Cost Effectiveness Ratio =A Project’s Total Development Subsidy / 30-Year Voucher Subsidy
In San Jose, LIHTC Projects have become more cost effective over time
(New Construction Projects)
-
0.5
1.0
1.5
2.0
2.5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Year
Co
st
Eff
ec
tiv
en
es
s R
ati
o
Cost Effectiveness Ratio =A Project’s Total Development Subsidy / 30-Year Voucher Subsidy
In San Jose, projects targeting lower income families also tend to be more cost effective
-
0.5
1.0
1.5
2.0
0% 10% 20% 30% 40% 50% 60% 70%
A Project's Average Targeting Family Income (% of AMI)
Cos
t Effe
ctiv
enes
s R
atio
Cost Effectiveness Ratio =A Project’s Total Development Subsidy / 30-Year Voucher Subsidy
Concluding Remarks: Differences in spatial outcomes between LIHTC and Section
8 tend to be modest, and the result of local factors. Contrary to the conventional wisdom, a supply subsidy
program like LIHTC can actually be more cost-effective than a demand subsidy program like Section 8. Regional variations influence the efficiency and equity advantage of different government housing programs. Relevant factors might include Local housing supply and demand.Local Family Income.Different government practices in administering LIHTC program.The existence of housing segregation and discrimination in local
housing markets.Specific project design.