Why focus on tax-credit properties?
The Low-Income Housing Tax Credit (LIHTC) program is a federal program that provides developers with tax credits for investing in the construction and renovation of affordable housing. It was created to encourage private investment in the development of affordable housing. Investments are typically structured as a limited partnership between an investor limited partner, who provides the necessary capital, and a general partner, who develops and operates the project in exchange for tax credits (Axel-Lute 2021). The local tenant protection ordinances, including rent control, currently do not apply to LIHTC properties, leaving low-income tenants extremely vulnerable to displacement. According to the National Low Income Housing Coalition, “The lowest-income LIHTC tenants can be particularly vulnerable to cost burdens and housing instability, because of the way rents are structured in the program. LIHTC rents are set at 30% of a unit’s income-eligibility threshold” (Emmanuel 2020). Changes to the Area Median Income (AMI) cause rents in LIHTC properties to fluctuate since the AMI is used to determine the eligibility thresholds. Most tenants who live in the tax-credit properties of focus (Valley Palms, Foxdale, and Orchard Glen) are considered by HUD income limit documentation system to be very low or extremely low income. According to the U.S. Census, the average median household incomes in the census tracts where Valley Palms, Foxdale, and Orchard Glen are located are: $63,690 (Valley Palms), $95,967 (Foxdale), and $58,511 (Orchard Glen), compared to $117,324 (San Jose). Changes to the AMI leave tenants in focus properties extremely vulnerable to housing insecurity. A report published by the Seattle Women’s Commission and the Housing Justice Project of the King County Bar Association titled “Losing Home: The Human Cost of Eviction in Seattle,” identified “unaffordable rent increases arising from rapidly increasing AMIs on which LIHTC rents are based are a key factor in evictions” (Cookson, Diddams, Maykovich, Witter 2018). In Santa Clara County in 2022, the AMI is $168,500, which is an increase of $17,200 since last year (Silicon Valley at Home).
In August 2022, tenants of properties owned by one of the largest for-profit affordable housing developers received notice of rent increases as high as 20% beginning October 1st - which is permitted under the current tax-credit thresholds that are determined by the increased AMI in Santa Clara County. Our community is vulnerable to displacement and should not bear such a rent burden while for-profit developers have received millions of dollars in tax credits while failing to maintain safe and habitable units. Valley Palms Unidos and tenant leaders from other tax-credit properties have launched this campaign to advocate for lower rent increases and policy changes to better protect tenants of tax-credit properties.
Sources:
Axel-Lute, M. (2021, June 4). Chicago Changes How It Allocates Tax Credits to Improve Racial Equity. Shelterforce.
Emmanuel, D. (2020, November 18). LIHTC Preservation and the Need for Rental Assistance. Shelterforce.
U.S. Census Bureau (2020). American Community Survey 5-year estimates.
Cookson, T., Diddamsm M. Maykovich, X., & Witter, E. (2018). (rep.). Losing Home: The Human Cost of Eviction in Seattle. Seattle, WA: Seattle Women’s Commission.