Rent-stabilized housing reaches 30-year deadline, states push new policies

Interviewer: Can you explain the significance of the Low-Income Housing Tax Credit (LIHTC) program, especially in terms of affordable housing?

Expert: Certainly! Established in 1986, the LIHTC program has played a crucial role in the development of affordable housing across the country. In fact, more than half of the nation’s affordable housing was built under this program, which offers tax incentives to developers to keep rents low. Since its inception, the LIHTC has facilitated the construction of about 3.6 million housing units. However, we are now facing a challenge as the 30-year affordability terms for many of these properties are nearing their end. This could lead to the loss of up to 223,000 units within the next five years, which could significantly increase rents for current residents.

Interviewer: What steps are states taking to protect tenants in this situation?

Expert: Various states are actively introducing policies aimed at safeguarding tenants from impending rent hikes. For instance, affordable housing units under LIHTC usually have a minimum affordability term of 30 years, with a significant number constructed in the 1990s. While some properties may remain affordable due to additional subsidies or landlord goodwill, states like California, Colorado, and New York are stepping up their efforts to preserve low-cost housing. Local governments and non-profit organizations can purchase expiring units and apply for new tax credits, and tenants can also unite to pressure landlords and city officials into action.

Interviewer: How is California addressing this issue specifically?

Expert: In California, State Treasurer Fiona Ma, who took office in 2019, has been pivotal in directing expiring LIHTC properties to developers dedicated to maintaining affordable housing, rather than allowing them to be sold for quick profits. The state has implemented regulations requiring landlords to notify state and local governments, as well as tenants, before their LIHTC terms expire. This gives housing organizations, non-profits, and governmental entities the first opportunity to purchase these properties to ensure continued affordability. Additionally, developments set to expire are given priority for new tax credits.

Interviewer: What criteria do LIHTC applicants need to meet in California?

Expert: All LIHTC applicants in California must have experience in managing or living in affordable housing. This requirement helps filter out developers who might not prioritize long-term affordability.

Interviewer: I understand that some states are taking different approaches. Can you provide an example?

Expert: Absolutely. In Colorado, there are around 80,000 LIHTC units, and the state recently passed a law that gives local governments the right of first refusal to purchase properties. This is specifically aimed at preserving about 4,400 units that are set to expire in the next six years. Colorado’s law requires landlords to inform local and state governments two years in advance of LIHTC eligibility expiration. Moreover, the state’s housing agency collaborates with local organizations to create assistance funds.

Interviewer: Are there challenges when it comes to tracking the expiration and preservation of LIHTC units?

Expert: Yes, tracking the exact number of LIHTC units that are up for expiration or potential preservation remains a challenge. It involves detailed categorization of various city, state, and federal subsidies, each with distinct affordability criteria and expiration dates. There is also concern that if states compile and disclose a list of soon-to-expire LIHTC properties, it could attract opportunistic buyers driven purely by profit motives.