What is the Low Income Housing Tax Credit (LIHTC) and how can it be used to improve health?

Since its inception in 1986, the Low Income Housing Tax Credit (LIHTC)^[1] has led to the construction or rehabilitation of over 2.8 million affordable housing units, making it the largest supplier of affordable housing in the U.S. Given the well-documented association between housing and health, the LIHTC thus provides a potential point of intervention for improving health through its impact on the supply of safe, affordable housing. The structure and implementation of the LIHTC, specifically the allocation of credits, location of developments and provision of on-site services, offer unique challenges and opportunities in considering how this policy can be used in a way that maximizes its potential health benefit.

The process by which tax credits are allocated are a prime example of how the LIHTC can be modified to highlight its impact on health. Credits are awarded based on federal standards set by the Treasury Department and supplemented by state criteria as specified in Qualified Allocation Plans (QAPs).  These QAPs give points to developers based on a range of factors including characteristics of the housing, financing, and population served.  As competition for tax credits is often tight, with developers ‘chasing points,’ these plans are highly impactful in shaping the types of housing that developers build, and thus offer an important opportunity to incentivize developers to create housing that promotes health.  As documented in a health impact assessment (HIA) from Georgia, several aspects of these plans may be modified to prioritize potential health returns, including the location of housing units in neighborhoods with abundant educational and economic opportunities, prioritizing design that encourages physical activity, access to on-site services that promote health, and reducing exposures (e.g., air pollution). Including such health-promoting criteria in QAPs is one way in which the LIHTC can be modified to improve its health benefit.

Photo of housing

LIHTC, Affordable Housing, and Health

The location of affordable housing in so-called ‘opportunity’ neighborhoods is particularly salient. Experimental and observational data has shown the impact of neighborhood effects on health, as well as educational and economic outcomes.

For instance, long term outcomes from the Moving To Opportunity social experiment found that adults given a voucher to move from public housing to an opportunity neighborhood had lower risk of diabetes and obesity compared to similar adults who remained in public housing , though there were mixed effects on boys’ and girls’ mental health. In addition, young children given the opportunity to move had higher earnings as adults. The benefits are likely multi-factorial and may include increased access to parks and grocery stores, reduced access to alcohol outlets and environmental exposures, improved safety, and improved schools.

Currently, advocates and policy analysts have noted that a disproportionate share of LIHTC housing is located in high-poverty neighborhoods, which may limit its potential benefits and indeed even worsen economic and racial segregation. As such, attention to where new housing developments are located, and incentivizing the development of housing in opportunity neighborhoods (for instance, by offsetting increased construction and land acquisition costs) may be another strategy by which the LIHTC can be modified to further its impact.

At the same time, continued development in high poverty neighborhoods may also provide opportunities for positive health impact. When developing in high poverty neighborhoods, LIHTC properties are expected to be part of a Concerted Community Revitalization Plan, a multisector plan that addresses community needs. In practice, however, what constitutes these plans is often poorly defined and rarely enforced, limiting the benefit that supplying affordable housing in these neighborhoods may have. Having clearer, standardized and enforceable criteria for community revitalization, and specifically including elements that address social determinants of health, is thus an important part of increasing the health impact of LIHTC properties in high poverty neighborhoods.

Integrating services

Finally, there has been an increased interest in how on-site services can be used to promote health and potentially be incorporated into QAP scoring criteria. Some LIHTC developers have explored different models tailored to the specific population being served (for example, care management focused on older adult or homeless populations and classes to promote health behaviors).  These types of services require careful assessment in order to develop a stronger evidence base and evaluate the necessary components and ‘dose’ for different populations and outcomes.  Such evaluations are critical in order to identify the appropriate ‘points’ that should be awarded under a QAP and identify potential funding models (e.g., from health care systems).

As the largest source of affordable housing in the U.S., the LIHTC is an important site of intervention for increasing the potential health benefits of safe, affordable housing. Critically examining the way that credits are allocated, and modifying that allocation to be attentive to the impact that housing and neighborhoods can have on the health of residents and communities, offers exciting opportunities to leverage the LIHTC in support of better health.

Recommendations

As the largest source of affordable housing in the U.S., the LIHTC is an important site of intervention for increasing the potential health benefits of safe, affordable housing. Our recommendations and strategies include:

• Incorporating health-promoting criteria in state tax credit allocation, known as QAPs (Qualified Allocation Plans)
• Incentivizing the development of housing in opportunity neighborhoods (neighborhoods with high educational and economic opportunities
• Requiring developers’ Concerted Community Revitalization Plans to provide clear, standardized, and enforceable criteria for community development, including elements that address the social determinants of health​
• Conducting careful assessments to evaluate and integrate the necessary on-site services
• Using rigorous research methods to investigate the health impacts of LIHTC developments and funding allocation

Critically examining the way that credits are allocated, and modifying that allocation to be attentive to the impact that housing and neighborhoods can have on the health of residents and communities, offers exciting opportunities to leverage the LIHTC in support of better health.

References

[1] The Low Income Housing Tax Credit is a subsidy program funded through the Internal Revenue Service and managed by state-level housing finance agencies. Through the LIHTC, developers can get tax credits for specific projects, which are then bought by investors to help fund those projects.