The Preservation of Affordable Housing

Affordable Housing

Introduction

The United States is in the midst of a severe affordable housing crisis. According to the National Low Income Housing Coalition (NLIHC), the country faces a shortage of over 7 million rental homes that are both affordable and available to the lowest-income renters. While federal housing subsidies provide a vital lifeline, they are far from sufficient to close this gap. Most policy discussions focus on expanding the supply of affordable housing through new construction. However, as Dan Emmanuel argues in The Preservation of Affordable Housing, preserving the existing federally assisted housing stock is equally, if not more, critical.

Preservation ensures housing quality and stability for current tenants. Without active preservation efforts, units are lost to market-rate conversion, physical deterioration, or program expirations. This loss directly undermines any attempt to expand supply. In short, you cannot close a 7-million-unit gap if you are losing hundreds of thousands of existing affordable units every few years. This summary explores the definition of preservation, the risks facing assisted housing, why preservation matters, forecasting needs, and concrete recommendations for legislators.

What Is Preservation? A Detailed Definition

Preservation, in the context of federally assisted affordable housing, refers to the sustained funding and policy commitments needed to ensure the long-term affordability, quality, and financial viability of subsidized housing as it ages.

Most federal project-based subsidies are not permanent. They may come as a one-time upfront capital allocation for development (e.g., Low-Income Housing Tax Credits) or as time-limited operating subsidies (e.g., project-based Section 8 rental assistance contracts). Once these initial subsidies expire, properties face a stark reality: they generate limited rental revenue because their tenants are, by design, low-income. Without renewed or sustained funding, owners cannot finance future capital needs (like new roofs or elevators) or cover ongoing operating costs (like utilities and staff). Therefore, preservation is not a one-time event but an ongoing process of renewing contracts, extending affordability restrictions, and providing capital for repairs.

The author identifies three basic, interrelated risks to preservation, based on the work of Reina (2018): exit risk, depreciation risk, and appropriations risk.

Exit Risk

Exit risk occurs when affordability and eligibility restrictions expire, or when property owners find legal ways to exit these restrictions early. In exchange for receiving a federal subsidy, owners agree to keep rents low and serve low-income tenants for a set period. The duration varies: it might be tied to a mortgage term, the life of a rental assistance contract, or a fixed period (e.g., 30 years for LIHTC properties).

However, owners can exit early through mortgage prepayment, foreclosure, or legal loopholes. One notorious loophole is the qualified contract (QC) option in the Low-Income Housing Tax Credit (LIHTC) program. Under certain conditions, this allows owners to bypass state housing agencies’ efforts to keep properties affordable. Properties with for-profit owners are at greater risk, especially in tight affordable housing markets where converting to market-rate housing would yield substantially higher profits. Exit risk leads directly to tenant displacement and the permanent loss of affordable units.

Depreciation Risk

Depreciation risk is the gradual decline in a property’s financial stability and physical quality over time. Surprisingly, the document notes that depreciation risk can be an even greater threat than exit risk. Because federally assisted housing has a legally limited rental income, owners often lack the revenue to perform routine maintenance or major repairs. Without continued public investment, operating subsidies or subsequent capital grants, these properties become physically outdated, inefficient, and even uninhabitable.

Failed physical inspections can result in the property being removed from federal programs entirely. A major challenge, however, is that centralised data on the physical condition of the federally assisted stock is only available for some programs (like public housing and HUD multifamily properties). For others, especially LIHTC, we have limited knowledge of depreciation risk, making it harder to target preservation resources effectively.

Appropriations Risk

Appropriations risk refers to the dependence of federally subsidized housing on annual decisions by Congress. Affordable housing is not a one-time cost. Rental assistance contracts and operating subsidies must be renewed each year by Congress. Moreover, these renewals must keep pace with inflation; otherwise, the real value of the assistance declines. If appropriations fail to increase with operating costs (e.g., insurance, utilities, wages), owners may default, sell, or let properties deteriorate leading to loss through exit or depreciation. Similarly, capital subsidy programs must be continually funded to address physical preservation needs. This risk is highest for programs without long-term funding commitments, such as project-based Section 8 and USDA rural rental assistance.

Why Does Preservation Matter? Five Key Arguments

Preservation is not merely a technical concern for affordable housing experts; it is essential for protecting the most vulnerable renters, stabilizing communities, and achieving climate goals. The document provides five compelling reasons.

1. Preventing Displacement and Housing Instability

Failure to preserve federally subsidized affordable housing can lead to unaffordable rent hikes, loss of habitability, or outright evictions. Preservation directly prevents these outcomes. While some federal programs offer Tenant Protection Vouchers (TPVs) when preservation fails, recent research questions their effectiveness as a safety net. Worse, TPVs are not available to tenants in the largest federal housing program: LIHTC. For millions of LIHTC tenants, preservation is the only option to ensure housing stability especially if their property’s affordability restrictions are maintained during the preservation process.

2. Retaining Difficult-to-Replace Housing in Desirable Neighborhoods

Replacing federally assisted housing in neighborhoods with good schools, transportation, and jobs is often impossible. Land costs are prohibitive, zoning regulations are restrictive, and NIMBYism (“Not In My Backyard”) blocks new development. Preservation allows low-income households to maintain access to opportunity-rich areas, combating displacement and residential segregation. In high-cost, exclusionary neighborhoods, preservation is frequently more cost-effective than new construction.

3. Preventing Further Disinvestment in Distressed Communities

In disadvantaged neighborhoods, the loss of a federally assisted property can trigger a vicious cycle. A deteriorated or market-rate-converted property can lead to adjacent disinvestment, lowering property values and reducing services. Preservation acts as an anchor, stabilizing the local economy and preventing the decline of already vulnerable communities.

4. Environmental Benefits and Climate Mitigation

Preservation presents a clear opportunity to retrofit older federally assisted housing for energy efficiency. This reduces greenhouse gas emissions and lowers utility costs for low-income families. According to the EPA (2024), the residential sector (including electricity use) accounted for 15.3% of U.S. greenhouse gas emissions in 2022. By upgrading insulation, HVAC systems, windows, and appliances, preservation can be a key part of a national climate strategy. While new green construction is valuable, preservation avoids the significant carbon footprint of demolition and new material manufacturing.

5. Stopping the Net Loss of Already Limited Assisted Stock

Given the shortage of 7 million affordable units and chronic underfunding, the existing federally assisted stock is irreplaceable in the short term. Approximately 5 million affordable rental homes are supported by federal project-based subsidies, representing just 10% of total U.S. rental housing. If the loss of units equals or exceeds new production, the stock will stagnate or decline. Preservation ensures that every unit produced remains in service.

Forecasting Preservation Needs: Data and Trends

Approximately 5 million affordable rental homes rely on federal project-based subsidies. The LIHTC program supports half of these homes (making it the largest), followed by project-based Section 8 (21%) and public housing (18%). Notably, 41% of federally assisted homes rely on multiple subsidy programs, meaning their preservation is even more complex.

The National Housing Preservation Database (NHPD) is a critical tool. It allows users to track federal subsidies at the property level, including expiration dates for affordability restrictions. According to a 2024 NHPD data analysis, eligibility and affordability restrictions are set to expire for 374,497 federally assisted homes in the next five years that is 7% of the entire federally assisted stock.

LIHTC (52%) and project-based Section 8 (29%) account for most of these expiring homes. The share of LIHTC properties at risk will rise toward the end of the decade as more properties reach 30 years of service. The NHPD accounts for some state-mandated extensions beyond 30 years, but data on Qualified Contract waivers and state incentives is extremely limited. This undermines efforts to identify specific at-risk properties.

Properties in strong housing markets with profit-motivated owners face the highest conversion risk. Others may renew or secure new funding. The outcome depends on local market conditions, owner motivation, and capital needs.

Physical Condition and Depreciation Risk

Centralized physical inspection data is limited to HUD programs. NLIHC and PAHRC (2024) found that 30% of public affordable housing homes and 4% of HUD multifamily homes scored below 60 (failing) on their last Real Estate Assessment Center (REAC) inspection. More alarmingly, one in five public housing homes and 3% of HUD multifamily homes failed at least two of their past three inspections, indicating high depreciation risk. These properties need immediate investment. The capital needs backlog for public housing alone is estimated at $70 billion.

In 2023, HUD began transitioning to the National Standards for the Physical Inspection of Real Estate (NSPIRE), which more heavily weighs health and safety deficiencies inside living areas. NSPIRE data will provide better insight into tenant-facing conditions.

What to Say to Legislators: Policy Recommendations

The document concludes with specific, actionable messages for legislators. Advocates should emphasize that continual reinvestment is required, and that preservation is inseparable from closing the affordable housing gap.

Funding Increases and Inflation Protection
Addressing the Public Housing Backlog
Closing LIHTC Loopholes and Improving Data
Conclusion: Preservation as a Core Strategy

Preservation is not a secondary or less glamorous alternative to new construction. It is a central, cost-effective, and urgently needed strategy to protect low-income renters, stabilise neighbourhoods, combat climate change, and make the most of scarce federal resources. With over 374,000 units at risk of losing their affordability restrictions in just the next five years, and a public affordable housing backlog of $70 billion, inaction is not an option. Advocates, legislators, and housing agencies must work together to increase funding, close legal loopholes, improve data transparency, and prioritize preservation alongside production. Only then can the United States begin to close the 7-million-unit affordability gap.

Also Read: 10 Year's Affordable Housing Delivery and Financial Strategy