The numbers are in: Missouri’s low-income housing tax credit (LIHTC) program fails to deliver. The program was supposed to increase the amount of available affordable housing across the state. But reports from the Missouri Housing Development Commission (MHDC) show that Missouri’s LIHTC program simply wasn’t working.
Each year, the federal government allocates funds for the LIHTC program, and historically Missouri has matched each dollar. In 2017, Missouri’s governor halted the state’s portion of the program after multiple reports showed glaring problems. The pause in state credit issuance allows policymakers to look back and determine whether the state’s LIHTC program ever had a meaningful impact.
According to project approval data from the MHDC, there was little change in federal LIHTC applications in 2018, the first full year without the state’s LIHTC program. Projects can vary in size so it’s important to look at the number of units being subsidized. Last year more than 2,200 units were funded solely by the federal LIHTC program, which exceeds the average over the previous four years (where Missouri was matching each federal dollar) by more than 400. This indicates that project developers still believe there is money to be made on low-income housing. In short, the program was zeroed out and nothing changed.
The LIHTC program essentially functions as a way to help finance construction. Eliminating Missouri’s contribution may have simply changed the way developers choose to make their profits. For example, the MHDC data show a large increase in approved LIHTC rehabilitation projects for 2018, but a small decline for new construction. There is also a sharp increase in the estimated average cost per unit of approved new construction projects. The point being, as long as a project remains profitable, developers will find a way to make it happen, no matter what they tell Missouri policymakers.
Despite the overblown claims of the negative consequences from eliminating Missouri’s LIHTC program, the state’s affordable housing landscape appears to be moving in the right direction. If policymakers want to save Missouri taxpayers millions of dollars and strike a blow against crony capitalism, it appears there is no greater opportunity than leaving LIHTC behind.