Freddie Mac has published two new white papers titled, “Spotlight on Underserved Markets: LIHTC in Rural Middle Appalachia” and “Spotlight on Underserved Markets: LIHTC in Indian Areas.”
In the first paper, Freddie Mac explores Middle Appalachia’s multifamily housing market with a special focus on the primary means of developing affordable housing in undeserved markets: the Low-Income Housing Tax Credit (LIHTC) program. We take a look at the market size of this subsidy program, including the geographic distribution of properties receiving LIHTC allocations, its importance in serving lower-income households, and we highlight some challenges to development based on demographic, economic and topographical factors. Below are some of the key findings of the research:
- There are 5.4 million residents in rural Middle Appalachia as defined by Duty to Serve. This represents 1.7 percent of the total U.S. population and 7.2 percent of the nation’s rural population.
- The population of rural Middle Appalachia skews older than the nation as a whole.
- Income in rural Middle Appalachia is 40 percent lower than the national average and 20 percent lower than the rural average.
- Rental housing, and multifamily rental housing in particular, is rare in rural Middle Appalachia. Only 26.7 percent of households are renters (compared to 36.4 percent nationally). Of these renter households, only 16.7 percent rent multifamily units (compared to 42.6 percent nationally).
- Developing new rental housing often requires multiple sources of capital. The LIHTC program is the most popular housing subsidy for providing affordable housing and, on average, supports about 25 properties in rural Middle Appalachia each year.
- Although LIHTC properties support a small percentage of all households in rural Middle Appalachia compared with the nation, they support a relatively high percentage of Middle Appalachian multifamily renters and play a vital role in providing affordable rental housing for tenants who would otherwise be severely rent-burdened.
In the second paper, Freddie Mac aims to provide clarity on the definition of Indian Areas and explore the role that the
LIHTC program plays in providing affordable multifamily rental housing for tribal members throughout the nation. It examines the market size of this subsidy program, as well as demographic and economic characteristics of Indian Areas, and we highlight some challenges to LIHTC development that are unique to this market. Some of the key findings of the research:
- Multifamily rental housing is rare in Indian Areas. The multifamily stock that does exist typically requires housing subsidies, namely the LIHTC program.
- Debt financing for LIHTC housing is very limited. As such, projects heavily depend on tax credit equity and housing grants.
- LIHTC properties in Indian Areas tend to be very small. Only 3.4 percent of the properties have 100 or more units, compared with 23.3 percent in the nation.
- Set-asides for tribal LIHTC projects are offered by three states, while several others have preferences for projects that serve this population.
- The poverty rate and unemployment rate among tribal members is more than double that of the nation. Household income is 31 percent lower. This makes the development and operation of affordable housing more difficult, particularly without subsidies.
- There are over 2,000 LIHTC properties in Indian Areas supporting over 80,000 units. However, this is an overestimate of the tribal LIHTC stock because not all properties that fall within the boundaries of Indian Areas specifically focus on serving tribal members.
- The unique definition of Indian Areas makes it difficult to precisely measure demographic, economic and housing characteristics.
- Despite these challenges, tribal housing authorities successfully develop LIHTC housing in Indian Areas each year, though the rate of development is too slow to close the gap in housing over the near or moderate term.