No Room at the Inn

DEC 27, 2012 1:24pm ET

WE’RE HEARING as it’s the holiday season, it’s fitting that a holiday metaphor is being used to describe the accelerating shortage of affordable housing in this country: there’s no room at the inn.

And we’re also hearing the shortage is spreading. No longer confined to the major cities with historically large numbers of renters, it is growing across the country.

Despite efforts to maximize the effect of low-income housing development tax incentives, the continuous imbalance between supply and demand of affordable rental housing options of recent years has reached “critical shortage” levels.

Findings from a study conducted by CohnReznick LLP, one of the nation’s largest tax and business advisory firms that specializes in Fortune 1000 market analytics, show the popular belief that there is “too much housing” available in the U.S. is not supported by data.

And they’re not the only ones. Tom Deyo, deputy director of NeighborWorks America’s national initiatives and applied research, told me “mounting evidence indicates the strain is growing especially for lower income renters” for whom it is harder to find affordable lodging.

Data, including findings from housing reports released by the Joint Center for Housing Studies of Harvard University, support insiders’ concerns about the nation’s affordable housing shortages, he added.

The CohnReznick report, titled “The Low Income Housing Tax Credit Program at Year 25: An Expanded Look at Performance,” analyzes state-by-state housing data between 2008 and 2010 when the foreclosure and overall economic crisis reached its peak.

It focuses on the operating performance of apartment buildings financed through LIHTC.

The study is based on information from 38 active organizations (syndicators and investors) managing over 17,000 multifamily properties, which represent over 70% of the LIHTC properties placed in service since 1986.

Performance evaluation is based on occupancy rates, debt coverage, cash flow for unit, “and the incidence of underperforming properties” by state, region and metropolitan statistical area.

This sample size represents roughly $73 billion in LHITC credits and $62 billion in equity contribution from investors that specialize in property development financing.

The analysis focused on whether affordable housing has been overbuilt and whether LHITC properties meet their financial obligations as required by the law.

The study once again confirms that the nation’s shortage of affordable housing persists and raises new concerns: Not only has the shortage of affordable rental housing reached an unprecedented, critical level, it also is a widespread issue across the country.

The shortage is present everywhere, according to CohnReznick principal Fred Copeman, who leads the firm’s tax credit investment services practice. “There is, in short, no room at the inn.”

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