University Of Georgia Study on Affordable Housing Tax Credits

University Of Georgia Study on Affordable Housing Tax Credits

The Low-Income Housing Tax Credit (LIHTC) program is designed to create affordable, workforce housing through the use of incentives to private developers. Georgia implemented a state LIHTC program in 2000 to complement the existing federal LIHTC program and to specifically enable construction of affordable housing in areas of the state outside the Atlanta metropolitan area where incomes are lower and the federal LIHTC program alone was not sufficient to finance the needed workforce housing. The state LIHTC also allowed projects that use tax exempt bonds, which carry 4% federal credits, to be economically feasible and thus significantly increased the total workforce housing that could be constructed. This study documents the return on investment generated by the state LIHTC and specifically addresses the investment in non-metro Atlanta, which potentially would not have occurred without the state LIHTC.

The Georgia Low-Income Housing Tax Credit program has been responsible for the direct creation of numerous high quality, multi-family work force housing units in Georgia, allowing the “working poor” to move out of dilapidated and often unsafe and/or unhealthy housing. Studies have demonstrated that unhealthy and unsafe housing are a major obstacle to enabling the working poor to move up the economic ladder. LIHTC investment is a significant catalyst for neighborhood revitalization and community redevelopment which results in improved economic opportunities for local residents. The state LIHTC program has increased affordable rental housing production outside of the Atlanta MSA, where additional financing is particularly needed. This study specifically analyzed the expenditures made in the development and construction of 15 LIHTC properties throughout the state of Georgia. [See Figure 1] Eleven of these properties are outside the Atlanta metropolitan area. The study also considered the ongoing incremental economic impact of the operation of these properties on an annual basis. The specific economic impact varied from one property to another, but on average, each net dollar of state income tax lost through the state LIHTC program created $8.36 of incremental economic activity. The range of economic impact per dollar of state LIHTC was from $3.00 on a project in Toombs County to $24.73 on a project in Fulton County.

State credits issued to projects for the years 2001 to 2003 enabled the construction of a total of 25,007 units of affordable housing. Using the average economic impact multiplier (the “multiplier” represents the economic impact per dollar of total investment rather than per dollar of state credit) of 1.6, the construction of this workforce housing created (or will create over the life of these projects) a total economic impact of $4.47 billion for the state. Furthermore, 12,000 new Jobs were created due to this program. That is, if this program were eliminated, the state would lose 12,000 jobs. This total includes construction and construction related impacts of $3.4 billion in those three years plus an additional $1.1 billion which is the present value of the economic impact from 20 years of operating these projects.

The state LIHTC program has substantially increased the number of affordable rental units for the workforce in non-metropolitan Georgia. Over the 4-year period from 1997 to 2000, 86 housing properties were funded using the LIHTC (9% tax credits), with a total of 8,611 units. Of this total, just over one-half, or 46 properties representing 3,531 units (41% of the total), were constructed outside the Atlanta metropolitan area. With the passage of the state LIHTC program, over the next 4-year period the number of properties and units constructed outside of the Atlanta metropolitan area expanded significantly. From 2001 through 2004,127 workforce housing properties were funded using the federal credits allocated to the state (9% tax credit projects) for construction of a total of 11,154 units. Of this total, almost two-thirds, or 82 properties representing 5,689 units (51% of the total) were funded for construction outside the Atlanta metropolitan area [Figure 2]. See Figures 4 and 5 for a geographic distribution comparison between 1997-2000 (pre-state LIHTC) and 2001-2004 (with state LIHTC). In addition, there were 29,886 units built using funding provided by the federal tax exempt bond program which also includes federal tax credits (4%), which do not count against the states normal cap , resulting in a grand total of 41,040 units built during the 2001 – 2004 period using the LIHTC program [Figure 3].

By every measure of tangible economic return, this program is successful. Additionally, affordable workforce housing is being built in greater volumes and is being built outside the metropolitan Atlanta area where economic development is so desperately needed. Quality of life is being improved for many of Georgia’s more vulnerable residents and thousands of jobs are being created. The program has clearly met the goals and objectives that were desired for the program when the legislature initially established the Georgia LIHTC.