Despite steady capital investment and economic growth following the 2008 financial crisis and housing bubble, a shortfall of new residential housing construction remains.5 This shortage—along with the consequent rise in housing prices—is felt most acutely by lower-income workers in search of affordable housing. In fact, a 2019 Harvard University study concluded that over 75 percent of households making under $30,000 are moderately or severely “housing cost burdened,” meaning over 30 percent of their income goes toward housing costs.6 The study concluded that available housing supply is usually built and marketed to higher-income earners above the median income.
The shortage of attractive and affordable housing has been a chronic problem in the United States at least since the beginning of the post-war period. As part of the Tax Reform Act of 1986, policymakers created the Low-Income Housing Tax Credit (LIHTC) to address the mismatch between housing supply and demand by encouraging developers to build units specifically allocated for residents with incomes below their area median income (AMI). Since it was created, the LIHTC has subsidized over 47,500 projects and 3.13 million housing units, using an average of $8 billion in forgone revenue to subsidize the costs of building more than 107,000 units across 1,411 projects each year.8 Today, the LIHTC is the largest source of affordable housing financing in the United States.
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