The Low-Income Housing Tax Credit (LIHTC) program is the largest supply-side affordable housing subsidy program in the U.S. By 2018, the program had subsidized over 3 million affordable units, with 2.7 million still active. Given the substantial evidence on the harms that evictions impose on families and communities, the program should include eviction reduction and mitigation as an explicit goal.
The Low-Income Housing Tax Credit Program
LIHTC subsidy comes in two basic forms: 9 percent credits and 4 percent credits. For an affordable housing project to receive the more valuable 9 percent tax credits, developers must apply to the designated city or state housing finance agency (HFA) through a competitive process; increasingly even 4 percent tax credits are being awarded on a competitive basis. The Qualified Allocation Plan (QAP) outlines the application process and how HFAs score and award credits to specific projects in alignment with their housing goals and priorities. Once the project is allocated the credits, HFAs are responsible for the project’s continued compliance under federal tax law. The HFA’s compliance manual (CM) outlines how projects will be monitored through the 15-year compliance period.
Like many government programs, the LIHTC program has both its advocates and its critics. We are not addressing debates about the efficiency, effectiveness, or fair housing aspects of the LIHTC program. Rather, our focus is on the extent to which federal policymakers and HFAs should include eviction monitoring, reduction, and mitigation as an explicit program goal, and how they might do so.
Subsidized Housing and Evictions
There is now overwhelming evidence from multiple studies regarding the negative effects that evictions have on families and children. Evictions are not only an outcome of poverty or falling incomes, they are also a cause of such phenomena, as well as of worsened health, educational, and other outcomes. Renters experiencing a forced move are more likely to lose their jobs. Mothers who are evicted are more likely to be involved in the criminal justice system, report poor health for themselves and their children, suffer more material hardship, and report parenting stress. Evictions lead to problems in school for children, poor health in the short and long term, and higher rates of child neglect.
It is often expected that housing subsidy should reduce the likelihood of eviction. A 2021 study suggests that subsidy might be expected to reduce evictions through three mechanisms. First, rent restrictions are expected to reduce housing cost burden and free up resources for other expenses. Housing Choice Vouchers, Project-Based Vouchers, and public housing generally limit housing costs to no more than 30 percent of the tenant’s income, although some tenants end up spending more than this on rent and utilities.
Second, housing subsidy programs might be expected to reduce eviction rates due to increased tenant protections. Most tenants in federally subsidized housing, including public housing, vouchers, and LIHTC units are protected from being evicted without good cause, although the definition of “good cause” varies across programs and from state to state. Good causes for eviction often include failure to pay rent, substantial violations of the lease, damage to the property, and repeated minor violations of the lease.
A third reason that affordable housing subsidies may offer greater protection from eviction is that tenants may be connected to services and support structures, including on-site child-care or after-school programs, health care programming, food assistance, and employment services.
There is recent research on the relationship between housing subsidies and housing stability or evictions. For example, the 2021 study referred to above found that the probability of eviction for public housing residents was 3 percent compared to 11 percent for those receiving no assistance, a 70 percent reduction. Another study found, however, that public housing had a stronger effect on reducing housing instability than other forms of housing assistance.
LIHTC Properties and Evictions
The LIHTC program differs in critical ways from other forms of affordable housing subsidy. Unlike most other federal affordable housing programs, tenants in LIHTC units pay rents that are not based on their own level of income but rather on area median income. Rents, including utility allowances, are generally set to be no more than 30 percent of 60 percent of the area median income. If tenants have income below 60 percent of the area median income, their rent will generally amount to over 30 percent of their income, unless they receive some additional form of subsidy (which about 41 percent of LIHTC residents do, according to the National Low Income Housing Coalition). Moreover, unlike vouchers or public housing, where a tenant’s portion of the rent can be adjusted downward if income falls, LIHTC rents change only according to the metropolitan median income. This suggests that LIHTC tenants, especially those without access to additional forms of housing assistance, may have a higher risk of eviction when their income falls than tenants whose rents are income-based.
In the LIHTC program, “good cause eviction” requirements have existed since 1990. However, the Internal Revenue Service has stated that, for the purposes of this requirement, good cause eviction is defined by state and local laws. This guidance implies that landlords of LIHTC properties may refuse to renew a lease for no cause without violating “good cause” eviction requirements, if that is permitted under state and local law. Some have argued that the federal good cause requirements place a burden on the landlord to demonstrate in court that a nonrenewal for LIHTC units is not a “termination of tenancy” for other than good cause, but it is unclear if any HFAs have brought such enforcement actions. Because LIHTC compliance is handled by state (and sometimes local) HFAs, the precise implementation and meaning of the federal LIHTC good cause requirement varies across states. For example, some HFAs have required all LIHTC leases to include a rider informing tenants of their rights under good cause requirements, while many have “entirely failed to implement the good cause requirement,” according to the National Housing Law Project.
Several recent studies show that residents of LIHTC properties are not at a significantly lower risk of eviction than residents of market-rate properties. A 2020 study in southern California found that, other things held equal, census tracts with higher percentages of rental units that were in LIHTC buildings had higher eviction rates. In Richmond, Virginia, a 2021 study found that properties with LIHTC subsidy alone had eviction rates very close to those of market-rate properties.
A study of evictions in Philadelphia found that tenants in LIHTC properties had only a modestly smaller likelihood of eviction than those in otherwise similar unsubsidized properties and the difference was not statistically significant. A study similar to the Preston and Reina research, but conducted in the Atlanta metropolitan area, produced similar results. In this study, 85 percent of the subsidized properties studied involved LIHTC. They found that age-restricted senior buildings, whether subsidized or unsubsidized, had, other things being equal, far lower eviction rates than non-senior market-rate buildings. However, non-senior subsidized buildings (the vast majority of which were LIHTC properties) had only modestly lower eviction rates than otherwise similar market-rate properties and the result was not statistically significant.
LIHTC having similar eviction rates to comparable market-rate units is serious cause for concern, especially given the increasing evidence demonstrating the harmful effects of evictions on children and families.
What Are HFAs Already Doing, If Anything?
To understand the extent to which HFAs might already be addressing evictions in LIHTC properties, we examined the two primary documents used to implement the LIHTC program, the Qualified Allocation Plan (QAP), which is the rubric used to score LIHTC applications and allocate LIHTC awards, and the compliance manual (CM), which is used to monitor funded projects. We collected the most recent Qualified Allocation Plans (QAPs) for all the 54 HFAs (50 states and four cities), and compliance manuals for 48. We documented each mention in the QAPs and CMs of the words “eviction,” “evict,” “evicted,” etc. We developed a set of five categories of what HFAs might do to incentivize eviction reduction. It’s important to note that we created these categories based on the literature around eviction prevention and mitigation, not based on what the HFAs already are doing.
Nearly all (91 percent) of the QAPs had no substantial mention of eviction, with 45 percent having no mention at all, and 46 percent nonsubstantive mentions (only referring to federal law). Only four (9 percent) QAPs contained one or more mentions we categorized as “minor” (encouraging eviction prevention or mitigation practices without awarding any points for them). Only one (Indiana) contained at least one mention we categorized as “medium” (awarding points or other incentives). No QAPs contained a mention we categorized as “major” (requiring eviction prevention or mitigation practices) and no QAPs included any requirement that applicants provide data on evictions.
We reviewed a total of 44 state and 4 city compliance manuals (we were unable to obtain manuals for Maine, Mississippi, Montana, New York, North Carolina, and Tennessee). Like the QAPs, the majority (96 percent) of the compliance manuals had no substantive mention of eviction, with 83 percent having “nonsubstantive” mentions, and 13 percent having no mention whatsoever. Two compliance manuals, New Mexico and Virginia, included “moderately substantive” mentions of eviction (encourages practices to reduce eviction). No manual contained mentions that were rated as “substantive” (requirement of practices to reduce eviction). Because points are not awarded in the compliance phase, there was one less category.
These results are not surprising, given that eviction reduction and mitigation are not explicit federal goals of the LIHTC program.
Recommendations for LIHTC Policy and Practice
We recommend that policymakers expand the goals of the LIHTC program to include eviction monitoring, reduction, and mitigation. The harms of evictions are now clear and large. Eviction prevention should be a higher priority in affordable housing program design and implementation.
Both the IRS and HFAs could make changes to advance eviction prevention in LIHTC properties. At the federal level, the IRS should mandate that HFAs publish their good cause eviction requirements. The IRS should go further and specify a federal minimum good-cause standard that establishes a floor for LIHTC eviction protections. The IRS should also mandate that developers have an eviction prevention plan. This document would outline strategies that developers and property managers can use to aid tenants experiencing financial setbacks, making eviction more of a last resort. For a model we can look to the Alberta Housing Act, which requires that government-subsidized housing in the province of Alberta include conflict mediation and legal support, communication, improved organization processes, and flexible tenant-centric regulations. Additional federal funding could be provided to fund short-term emergency rental assistance as part of eviction prevention plans.
All HFAs should first ensure that all LIHTC owners are following the federally mandated good cause eviction requirements, as spelled out by the National Housing Law Project. This should include enforcing good cause eviction protection under LIHTC projects’ extended use periods. Lease riders should be used to highlight good cause eviction protections for tenants.
Second, HFAs should award optional points to LIHTC proposals that provide eviction prevention plans. Such plans could include providing tenants with access to emergency rental assistance funds and funded legal assistance. Enterprise Community Partners identifies a variety of strategies including providing tenants access to social workers, eviction prevention counseling, creating emergency rental assistance programs, and eviction diversion programs. HFAs could award more points to tax credit applications that have more robust eviction prevention plans such as those allocating funding to rental assistance. Or HFAs could require some minimum level of eviction prevention assistance as a required component of every proposal and then award more points for proposals that go further. Such measures might include requiring a rental assistance reserve from developers in their project budgets, which could be used to assist renters with arrears owed. An alternative would also be for developers to set aside funding to partner with existing service providers that provide housing stability programs to tenants facing eviction.
Third, HFAs should regularly collect eviction filing and judgment data from the LIHTC projects and make it public, organized both by owner and by property manager. To complement this data, it would be important to collect tenant screening information, property complaints, and related data. Otherwise, efforts to scrutinize the eviction data of LIHTC owners could unintentionally result in a tightening of tenant screening protocols, including screening out more tenants with some history of eviction. Some governments, such as Cook County, Illinois, have already made efforts to further protect tenants with eviction and criminal histories in the tenant screening process. HFAs could use eviction data on developers and management companies to screen out certain applicants, especially those with high eviction activity that cannot be explained by differences in their tenant populations.
Fourth, especially in states with weak tenant protections, HFAs should provide additional points to LIHTC applicants who promise to provide tenants with extended pre-filing periods or other tenant-protection processes, such as mediation services between developers and tenants, not regularly provided for by state landlord-tenant law.
Although it may be too early to tell, some HFAs may have learned some lessons as they faced the COVID-19 pandemic. This could include reinforcing established partnerships with local service providers for obtaining government assistance, creating staff positions for eviction prevention, and identifying best practices from existing LIHTC owners. One for-profit developer in Boston created a “housing stability plan” prior to the COVID -19 pandemic, made up of proactive interventions that its property managers can implement before filing evictions.
It is important to recognize that, given the structure of the LIHTC program, eviction is sometimes an unavoidable process that owners and property managers must use to protect a project’s financial viability and, by extension, the stability of the remaining tenants in a building. Foreclosure triggers the failure of the project and recapture provisions. We are not suggesting that all evictions can or should be eliminated in LIHTC properties, but that the IRS and HFAs establish stronger minimum guidance and evaluation parameters pertaining to evictions and related tenant protections. Policymakers should do more to steer scarce LIHTC resources to owners (and their property managers) that do not engage in excessively aggressive eviction practices and that make efforts to avoid eviction when possible.
Housing instability and evictions have serious negative effects on low-income households. There is little evidence that LIHTC properties have a substantial negative impact on evictions. Our analysis of HFAs’ QAPs and CMs finds little policy at the HFA level aimed at reducing evictions in LIHTC properties. We argue that eviction reduction and mitigation should be an implicit goal of the LIHTC program and that the IRS and HFAs establish evaluation parameters and minimum guidance pertaining to evictions and related tenant protections.
The authors would like to thank the affordable housing practitioners and scholars who provided comments on an earlier version of this paper, including Aja Bonner, Ryan Fleming, Kirk McClure, Sara Patenaude, and Jessica Plante. All errors and opinions in the paper remain solely the responsibility of the authors.
It’s been 29 years since our first 9% tax credit project. I have yet to seen one single credit unit converted to market anywhere. It’s not an issue.