Challenges for Low-Income Housing Tax Credit Projects at Year 15 and Beyond in a Weak Housing Market: The Case of Detroit, Michigan

Abstract

ABSTRACTProjects financed through the Low-Income Housing Tax Credit (LIHTC) program, the largest producer of affordable housing in the United States, face ownership transition after 15 years in service when tax-credit investors leave. In Detroit, Michigan, projects whose transitions were complete but that were subject to additional affordability restrictions fared much worse than national surveys showed. Many projects continued to provide affordable housing, but a share experienced mortgage or tax foreclosure, and many units became permanently uninhabitable, increasing disinvestment in neighborhoods. Projects reaching year 15 from 2016 through 2022 were under considerable financial stress as of 2015 and would likely need financial restructuring. Few high-capacity nonprofit developers existed to assume property ownership. The intervention of mission-driven syndicators helped stabilize numerous projects. Detroit’s experience illustrates the challenges LIHTC projects are likely to face in weak-market cities. Additional studies should investigate the year-15 challenges in diverse housing markets and the efforts to address those challenges.