Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

High Costs of Low-Income Housing

by December 18, 2023
December 18, 2023
High Costs of Low-Income Housing

Chris Edwards

Many American cities need more low‐​income housing, but governments reduce supply and raise construction costs with regulations, taxes, and bureaucracy. The Wall Street Journal reports on a Los Angeles low‐​income project, Lorena Plaza, that has taken 17 years to complete because of neighborhood opposition, lawsuits, and zoning and environmental rules. The Plaza’s 49 units are costing $34.2 million to build, or about $700,000 each.

The Journal describes state and local barriers to efficient apartment construction but does not address a major federal barrier—the low‐​income housing tax credit (LIHTC). The federal tax break is supposed to aid housing construction, but it adds many costs and complexities, as it likely did for Lorena Plaza.

Vanessa Calder and I described LIHTC failings in a 2017 study. The federal government distributes the credits to the states, which award them to developers to construct apartment buildings. The developers must cap rents for the units they set aside for low‐​income tenants. The states submit qualified allocation plans (QAPs) to the federal government, which micromanage LIHTC allocations and housing projects in huge detail. Virginia’s QAP and related 238‐​page manual here give a sense of the intense bureaucracy. LIHTC rules are so complex that one guidebook spans 1,790 pages.

California’s Treasurer lists LIHTC applications here. Click on the link for Lorena Plaza and open the Excel file of 17 spreadsheets. The “instructions” sheet is 411 rows, the “checklist” is 1,245 rows, the “application” is 1,053 rows, the “points system” is 701 rows, etc. Aside from the wasteful bureaucracy needed to deal with all this paperwork, the mass of rules for low‐​income housing projects stifles cost‐​saving innovations.

The financial structures of tax‐​credit deals are more complex than market‐​based deals, which also raises costs. Further, tax credit allocations are based on estimated costs, which encourages developers to inflate their estimates and provides little incentive to find cost savings during construction. Finally, the occupancy regulations of LIHTC properties impose substantial long‐​term administrative and compliance costs.

The LIHTC is a corporate tax break that mainly benefits investors, banks, and developers, not low‐​income tenants. There is “minimal federal oversight” of the costly program, notes the GAO, which I suspect is because the credit is so complex that the IRS has decided not to devote auditing resources to it. The lack of oversight has contributed to large amounts of abuse and corruption.

As lawmakers look to simplify the federal tax code, the LIHTC is ripe for repeal. Housing affordability is a serious problem, but state and local regulatory reform is the solution, not federal tax subsidies.

For further reading, see Low‐​Income Housing Tax Credit: Costly, Complex, and Corruption‐​Prone.

0
FacebookTwitterGoogle +Pinterest
previous post
The industries expected to thrive in 2024
next post
Missouri AG Investigates Private Group’s Advocacy

You may also like

As GLP-1 Drug Shortage Ends, Why Will Patients...

October 11, 2024

The FDA Causes Harm

April 2, 2025

New Defending Globalization Content: Global Equality; ‘Deindustrialization’; India’s...

October 24, 2023

The Myth of the Free-Market US Health Sector

May 13, 2024

Beer, Wine, Whiskey, Cigars, and Cigarettes Are Not...

April 30, 2024

SCOTUS Sidesteps Section 230

May 19, 2023

If Funding and Enforcement for Students with Disabilities...

April 24, 2025

David Boaz Is with Us

June 7, 2024

Reviewing the Case Against a Border-Adjusted Corporate Income...

October 17, 2024

Trump’s 100-Day Health Scorecard: Mixed Signals and Missed...

April 30, 2025

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • How Staff Can Strengthen HIPAA Compliance and Security

      June 29, 2025
    • Lotus denies plans to close Hethel factory amid US expansion talks

      June 29, 2025
    • Top university degrees lose sway as tech employers prioritise job-ready skills

      June 29, 2025
    • Government urges supermarkets to make healthy food more appealing in bid to tackle obesity crisis

      June 29, 2025
    • Senate Republicans ram Trump’s ‘big, beautiful bill’ through key test vote

      June 29, 2025
    • Chief Justice Roberts sounds alarm on dangerous rhetoric aimed at judges from politicians

      June 29, 2025

    Categories

    • Business (8,334)
    • Investing (2,081)
    • Politics (15,853)
    • Stocks (3,177)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved