How Federal Tax Credits Support Affordable Workforce Housing in Louisiana

October 31, 2018

The Louisiana Housing Corporation is helping build stronger and more resilient communities across the state through a federal program that promotes the creation of affordable and workforce housing by private developers.

The low-income housing tax credit (LIHTC) is the among the most important resources for creating affordable rental housing in the United States today. Created in 1986, the program provides a strong incentive for the development of affordable rental housing through a dollar-for-dollar reduction to an investor’s federal tax liability.

The program, which is administered in Louisiana by the LHC, has spurred millions of dollars of private investment in affordable rental housing in rural and urban communities throughout the state, often in areas where housing stock has been damaged by natural disasters.

“We’ve been able to really marry a community’s needs with the opportunity to invest,” says LHC Executive Director Keith Cunningham. “We’ve been able to place affordable housing into some of our most desperate areas across the state, which really provides the only opportunity for a certain standard of housing to exist in some of these communities.”

Supporting a Statewide Priority

Before Hurricane Katrina struck in 2005, Cunningham says, housing was not seen as a priority by most policymakers in the state. That changed with the devastating storm, prompting officials to place more of an emphasis on encouraging the creation of affordable housing, he says.

“We didn’t have resiliency in our communities because we didn’t have enough housing stock,” Cunningham says.

Cunningham says housing can become out of reach when it’s located in high-opportunity areas where market rates are too expensive for many working families. Other once-affordable properties slide into disrepair because there aren’t enough dollars to cover debt and the upkeep of the property. He says that over time, the lack of affordable or workplace housing — rental units people can afford within reasonable proximity to their job — can chip away at the fabric of a community.

“Our tax credits really bridge that gap,” Cunningham says. “We’ve been able to create affordable housing opportunities by using these credits, this equity, to drive down the overall cost of the developments and put them in the position where they can house individuals who are low to moderate income.”

The LHC and the tax credit program it administers continue to play an important role in helping communities recover from natural disasters that affect housing, often by combining federal disaster recovery dollars with the use of the low-income housing tax credit. “We’ve had a definite impact after floods and natural disasters as multi-family housing becomes a much-needed resource,” Cunningham says.

Committing to a Community-Based Approach

Cunningham says one of the primary goals for the LHC is to leverage federal tax credits to create housing that is representative of the community and that makes a lasting positive impact on the surrounding area by encouraging economic development.

“We’re trying to create good communities,” he says. “We’re trying to make sure our investments not only exist for 30 years — which is a component of affordability for a tax-credit development — but that those projects actually serve the community in which they are placed. And not just a housing standpoint but from a community-building standpoint. We see these projects as not just housing solutions. They are a tax-base solution, they are a job-creation solution. They really begin the process of changing communities around, and we believe we can do that with our credits.”

These federal tax credits, which are targeted at developers, are different than Section 8 housing, a separate federal program that offers vital assistance for very-low-income, disabled and elderly renters. That means some private developers have been able to leverage the credits to build impactful mixed-use and housing developments that feature a combination of affordable and market-rate housing units.

“We think you can actually have a community that has both affordable components and market-rate components,” Cunningham says. “They both look alike, they both have the same countertops and floors, and they both represent a good opportunity for an individual to live.”

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