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Report: Tax-Credit Criteria Changes Direct Affordable Housing to Higher Opportunity Areas

Posted by Laura Denker on May 23rd 2017

Results contrast with national figures; New Jersey plan could serve as national model for increasing effectiveness of popular financing tool

May 23, 2017 — While recent news reports have highlighted the low number of affordable housing projects using federal tax credits that are built in high-opportunity areas, New Jersey Future today released an analysis showing that strategic changes in the way the state allocates those tax credits have meant a significant increase in the number of new affordable housing projects that have been directed away from high-poverty neighborhoods and toward areas that offer greater economic opportunity.

New Jersey Future compared affordable housing projects that received federal Low Income Housing Tax Credits between 2005 and 2012 with projects that received credits between 2013 and 2015, after the New Jersey Housing and Mortgage Finance Agency (NJHMFA), which administers the tax credits in the state, made significant changes to the criteria it uses to award them. The agency made the changes with the specific goal of steering new construction of affordable housing away from areas of concentrated poverty and toward areas where public transit and major job centers existed, and that have higher-performing school districts.

Before the adjustment, a full two-thirds of projects near transit were located in distressed or low-income places; after the adjustment, 79 percent of such projects were located outside of low-income census tracts. Half of all projects post-2013 were in municipalities with strong job centers, and more than a third were located in higher-performing school districts. (The last two criteria were not tracked prior to 2013, so no comparison data are available.)

By contrast, despite it being an explicit goal of the LIHTC program to create new affordable housing in high-opportunity areas, as few as 17 percent of projects financed with LIHTCs nationally are estimated to have been built in such places. As recent news reports note, studies have shown that moving families to high-opportunity areas helps their children rise out of poverty, thus reducing the chance that as adults they will need housing assistance.

“New Jersey has shown itself to be a national pioneer by changing the way it awards its federal housing tax credits to ensure that new affordable housing does not get concentrated in high-poverty areas,” said New Jersey Future Executive Director Peter Kasabach. “It’s clear from this analysis that adjusting the allocation methodology will have real results in terms of moving more people to greater opportunity, and we applaud the New Jersey Housing and Mortgage Finance Agency for its leadership in making these changes.”

“The Low Income Housing Tax Credit program in New Jersey is making a real difference by expanding opportunities for working families, seniors and those with disabilities to live in safe neighborhoods and near good schools and jobs,” said Kevin Walsh, executive director of Fair Share Housing Center. “We look forward to working with our partners to ensure that this program continues to create opportunity for years to come.”

“The New Jersey Housing and Mortgage Finance Agency is proud to administer the Low Income Housing Tax Credit program, which is widely considered to be the most successful affordable housing production program in history, for the benefit of New Jersey’s hard working families, seniors and individuals with special needs,” said NJHMFA Executive Director Anthony Marchetta. “Largely due to the program’s efficiency and effectiveness, NJHMFA is able to fulfill its mission to provide decent, safe and affordable housing in areas of high opportunity — near transit, good schools and job centers.”

The New Jersey Future report highlights where the NJHMFA program has made strides and which data should continue to be tracked to see if more gains can be made.

Download the report