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LIIF Supports TCAC's Efforts to Expand the Low-Income Housing Tax Credit in California

Written by Low Income Investment Fund

As a leading community development financial institution (CDFI), the Low Income Investment Fund (LIIF) is dedicated to creating pathways of opportunity for low-income people and communities. Serving the most vulnerable populations, LIIF works to create a comprehensive approach to combating poverty alleviation and furthering healthy community development.

The Low-Income Housing Tax Credit (LIHTC) program has been essential to this effort, helping LIIF to transform communities and improve the quality of life for residents. The LIHTC program, created in 1986 and made permanent in 1993, is the most extensive affordable housing program in the United States today. As the primary federal government program for encouraging the investment of private equity in the development of affordable rental housing for low-income households, the LIHTC program has helped to finance 2.97 million housing units and 45,905 projects. LIIF strongly supports any effort to protect, expand, and strengthen the LIHTC program.

For years, the options in California for low-income families have been limited to areas of low opportunity. Recently, the California State Tax Credit Allocation Committee (TCAC) took a major step to improve the effectiveness of the LIHTC program in the state, publishing proposed regulation changes that would incentivize developers to place new construction, family-sized projects supported by the most generous and competitive component of the LIHTC program (the so-called “nine percent credit,” which provides 70 percent of low income unit costs) in higher opportunity areas.

The LIHTC program has helped to finance 2.97 million housing units and 45,905 projects. LIIF strongly supports any effort to protect, expand, and strengthen the LIHTC program.

The purpose of the regulation is to increase low-income families’ access to high-resource neighborhoods where there historically have been limited affordable housing opportunities, and to provide meaningful investments in under-resourced neighborhoods. With this resolution, TCAC hopes to mitigate the pattern of placing affordable housing units in low opportunity, highly segregated neighborhoods around the state. LIIF supports TCAC and the California Department of Housing and Community Development’s (HCD) goals of avoiding further segregation and increasing access to opportunity for low-income families by developing more affordable homes for families in areas with greater resources.

In recent years, a growing body of research by Stanford professor Raj Chetty and others has emerged showing the long-term benefits of growing up in a lower-poverty, higher opportunity neighborhood. In their analysis of long term data from the landmark Moving to Opportunity housing mobility experiment begun in the mid-1990s, Raj Chetty, Nathaniel Hendren, and Lawrence Katz show that moving to lower-poverty neighborhoods significantly improve college attendance rates and earnings for children who move before the age of 13. These children also live in better neighborhoods as adults and are less likely to become single parents. These findings show that offering low-income families the opportunity to live in higher opportunity, lower-poverty neighborhoods may have a positive impact on the intergenerational persistence of poverty.

TCAC’s proposed regulation constitutes an important step forward in recognizing the power of this research and redressing an imbalance in the State’s current approach to affordable housing development supported by the LIHTC program. LIIF supports TCAC’s efforts to provide California’s most in-need families with more access to housing in higher-resource neighborhoods. Learn more about LIIF’s support of this effort in a letter from our President and CEO, Nancy O. Andrews.