Location Efficiency in the LIHTC Program

A study recently published online in Housing Policy Debate titled “How Location Efficient is LIHTC? Measuring and Explaining State-Level Achievement” finds that recently built rental housing funded by low-income housing tax credits is more likely to be in “location-efficient” neighborhoods than the overall housing stock. The study finds that state qualified allocation plans (QAPs), and an active nonprofit sector are key factors in the location efficiency of the LIHTC rental stock.

The article defines “location efficiency” as the accessibility of a given location to daily destinations, such as employment. Higher location efficiency is thought to lower transportation costs, which are often residents' largest expense after housing. Higher location efficiency has also been shown to be associated with improved public health and environmental outcomes, as location-efficient neighborhoods tend to be more walkable, possibly increasing physical activity and reducing vehicle emissions.

The authors examined the neighborhood location efficiency of LIHTC housing built between 2007 and 2011. Neighborhood location efficiency was represented by seven criteria: residential density of at least seven housing units per acre, sufficient street density, sufficient neighborhood retail services, high regional accessibility by car, transit use by at least 5 percent of the neighborhood’s working population, a fixed rail station within a half mile, and transportation costs of 20 percent or less of household income for a single-parent household earning 50 percent of median income. The neighborhoods were represented by census block groups.

The authors found that the LIHTC stock appears to be more location efficient than either the rental or overall housing stock. Thirty-five percent of LIHTC units were located in neighborhoods that met at least three of the criteria for location efficiency, compared to only 28 percent of rental units and 16 percent of the overall housing stock. The authors suggest that state affordable housing policy makers and nonprofit developers can play a significant role in creating greater location efficiency in the LIHTC stock.