Increase Support for the Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (LIHTC) is the largest and most effective federal program to encourage the development and rehabilitation of affordable rental homes. The program competitively awards tax credits to offset construction costs in exchange for reserving a significant number of rent-restricted units for low-income households. LIHTC makes affordable housing economically feasible by providing a subsidy to make up the difference between what it costs to develop a property and the income that can be generated to support those costs. Increasing LIHTC funding, and enhancing the program through reforms, would increase the preservation and construction of much-needed affordable rental housing units, disrupt patterns of segregation and concentrated poverty, and improve health outcomes for low-income Americans.

Eliminate Restrictive Land Use and Zoning Policies

Zoning restrictions by state and local governments, such as restrictions on multifamily homes or parking requirements, can unnecessarily curb the supply of affordable housing. Exclusionary land use and “not in my back yard” sentiments entrench patterns of segregation and concentrate both wealth and poverty. While the federal government is not in charge of local zoning decisions, it can incentivize communities to reform their land use policies and spur affordable housing development, reward communities that eliminate restrictive policies, and limit funding to communities that continue exclusionary land use practices. Federal agencies could also offer technical assistance and provide guidance for policies to remove these barriers.

Preserve Public Housing

About 2.2 million people in nearly 1 million households live in public housing. While additional funding is needed to address the backlog of repairs, funding should also lift up programs that bring in private capital to support revitalization and modernization efforts. HUD’s Rental Assistance Demonstration (RAD) program allows public housing agencies (PHAs) to convert public housing units to properties with long-term contracts, designated for low-income residents. When public housing units are converted under RAD, PHAs can maintain ownership or the properties can be transferred to new public, nonprofit, or for-profit owners. RAD aims to preserve and modernize affordable housing stock, while incentivizing public-private partnerships to facilitate access to private sources of capital by PHAs.

Build and Rehab Owner-Occupied Housing in Distressed Neighborhoods

To promote first-time homeownership and potentially help close the racial gap in homeownership rates, there is an urgent need to address a key problem: development costs often exceed market values for owner-occupied homes in distressed neighborhoods. A federal tax credit could help close this “appraisal gap” by incentivizing private investment to build and rehabilitate homes in these neighborhoods for low- and middle-income families. The bipartisan Neighborhood Homes Investment Act (NHIA), S.98, establishes such a credit with the goal of building and rehabilitating 500,000 homes over the next 10 years. Each $1 billion in NHIA investment is estimated to support 25,000 homes built or rehabilitated and over 33,000 jobs in construction and construction-related industries.

Expand and Reform the Housing Voucher Program

HUD’s Housing Choice Voucher program, which helps cover the cost of rent for private, market-rate units above 30% of a voucher holder’s income, has been highly effective at improving housing stability and economic opportunity for the families they serve. Housing vouchers allow low-income households to live in communities they may not typically be able to afford, offering them a chance to move out of high-poverty, low-opportunity neighborhoods and access good schools, jobs, and other amenities. Expanding funding for the Housing Choice Voucher Program would limit the number of eligible households on voucher waitlists, while significantly reducing poverty and helping keep millions of families more stably housed. Additionally, reforms could ensure voucher recipients are treated fairly and not subject to “source of income” discrimination.

Create a Permanent Emergency Rental Assistance Program

Many families with modest incomes can generally afford rent in their communities without assistance but, with limited savings, may be unable to manage sudden financial shocks or income volatility. Emergency rental assistance programs are designed to provide short-term relief for families temporarily unable to pay rent and other costs. Local emergency rental assistance programs exist in some communities across the country and are generally available to lower-income households with an eviction filing or utility shutoff notice due to circumstances beyond their control. The federal government established a temporary emergency rental assistance program to respond to the COVID-19 pandemic, but no permanent program exists that is available nationally. There is a need for a permanent, federally-funded program that can be scaled up quickly during any future economic crisis that results in widespread job and income losses.

Support Sustainable Homeownership

Incentivizing homeownership is not sufficient—federal policies must facilitate sustainable homeownership to protect consumers and ensure new homebuyers are fully prepared to assume the obligations of homeownership for the long-term. For example, increasing funding for pre-purchase and post-purchase counseling as well as other financial literacy and coaching programs can empower a greater number of first-generation homebuyers and help them benefit from the wealth-building opportunities that homeownership can offer.