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There is an abundance of research highlighting the lack of affordable rental housing in the U.S. Given this scarcity, it is all the more important to understand the future of the existing subsidized affordable rental housing stock.

The federal government has made a direct investment in increasing the supply of affordable housing through programs that have subsidized the development of more than 6 million units of rental housing. Some of these units receive ongoing rental subsidies that provide dedicated apartments for low-income households. When subsidies expire, both the affordability of the units and the public investment in the property and ongoing subsidy are at risk of being lost.

This report aims to analyze what we know about subsidy expirations and the preservation of supply-side affordable housing, and it identifies gaps in our knowledge about preservation.

The key findings from this report are:

  • Subsidized rental housing represents a small but increasingly important share of the rental market as markets become less affordable, particularly for the lowest-income households.
  • Properties developed through subsidy programs that finance the production of housing
    face three potential risks: expiration or exit, depreciation and appropriations risk.
  • There is a large scale of unitsat risk ofexit or expiration. There are over 590,000 units in Section 8 project-based rental assistance (PBRA) properties where an owner will have the option to renew their subsidy or exist the program; over 450,000 units in Low-Income Housing Tax Credit (LIHTC) properties; and 120,000 units in HOME-financed properties where the subsidy and affordability restrictions are due to expire over the next 10 years.
  • While we know that over 1 million units have affordability restrictions set to expire,
    many of these properties will renew the subsidy, apply for a new one, or maintain their units as affordable absent any subsidy. How many units will remain affordable, and for how long, is unknown.
  • Units targeting the lowest-income households are most likely to become less affordable when they exit a subsidy program. This is concerning when we consider that many municipalities have difficulty financing the development of new units for the lowest-income households because of the high level of subsidy required to do so.
  • There are an additional 1 million LIHTC units approaching their 15-year disposition period over the next 10 years. While their affordability restrictions do not expire, many of these units will need rehabilitation as part of a normal life-cycle recapitalization.
  • Funding for affordable housing production programs has not kept pace with the needs of
    existing units and the demand for additional affordable units. The LIHTC is the nation’s largest subsidy program for producing affordable housing; however, there is increasing uncertainty about the future of the LIHTC due to recent tax reform.
  • A large share of existing subsidy financing sources is spent on the preservation of existing affordable housing. As preservation needs increase, there will be further competition for resources that could force municipalities to decide between preservation and financing new affordable housing units.
  • Existing research shows that many subsidized properties eligible to exit or expire are in
    high-opportunity areas where there are few remaining affordable units.

Evidence suggests that the preservation of affordable housing could ensure access to opportunity neighborhoods, but much more research is needed in this area. There is also evidence that subsidizing preservation may be less costly than developing new subsidized or unsubsidized rental units. However, preservation efforts only ensure existing subsidized units remain affordable and do not increase the overall stock of affordable units.

Further research is needed on whether preservation increases access to opportunity neighborhoods, promotes household stability, and minimizes the loss of investments in units. With the scale and scope of the potential demand for preservation going forward, it is imperative that federal government and local governments better understand and measure preservation needs, determine preservation and new construction priorities, and develop policies and programs that reflect and support those priorities. A broad suite of policy responses should be considered, particularly ones like proper lifecycle underwriting that acknowledge the depreciation risk in these programs.

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