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New Study Shows LIHTC, Housing Assistance Critical in Promoting Stability and Economic Mobility

September 9, 2020

Contact: Cora Johnson-Grau

(510) 859-7073

A new analysis of the incomes of residents living in housing managed by one of California’s largest affordable housing developers offers a unique window into how lower-income households have fared through economic decline and growth, providing important evidence for expanded investment into affordable housing and rental assistance in the context of the current COVID-19 pandemic and recession.

The analysis finds that housing assistance is critical for stabilizing lower-income households, and is positively associated with household income growth over time. But these benefits are undermined by low-wage jobs and economic downturns—both of which point to the critical need for rental assistance.  In addition, the state’s lagging construction of sufficient housing, particularly for moderate-income households, limits the ability of those who do see wage gains to move out of subsidized housing.

Released today by the Terner Center for Housing Innovation at UC Berkeley, the report “Recession and Recovery: The Critical Role of Housing Assistance in Promoting Economic Security for Low-Income Households” is believed to be the first study to track the incomes of residents living in Low-Income Housing Tax Credit-funded properties over time.

The analysis is based on longitudinal data for residents living in properties operated by Eden Housing between 2003 and 2019. The authors find that California’s economic expansion resulted in significant wage growth among residents with housing assistance. Yet most of these gains were concentrated among residents earning around $40,000. For households making less than $25,000, incomes have been largely stagnant, even as the state’s housing costs have risen dramatically. For these households, housing assistance is critical to preventing homelessness, pointing to the importance of expanded rental subsidies for low-income families.

“At Eden, we believe that home is where your start is. The findings in this report underscore this and illustrate that when low-income families find lasting housing stability, not only does it improve their quality of life, it helps them climb the economic ladder, and find opportunity,” said Linda Mandolini, President of Eden Housing. “During this challenging time, many low-income families are feeling firsthand the effects of rising housing costs coupled with record unemployment rates. Ensuring these families remain safely housed and off the streets evidently requires expanded rental assistance.”

The study also finds that local housing costs outstrip even what households experiencing income gains can afford. California’s failure to build sufficient housing, particularly moderate-income housing, prevents households from moving up the housing ladder and stops affordable units from cycling back to other lower-income households in need.

“The COVID-19 pandemic has revealed the existing holes in the housing safety net, and the data in this report demonstrate the vulnerabilities that lower income households face during an economic downturn,” said Carolina Reid, Faculty Research Director of the Terner Center and author of the report. “Policymakers’ top priority should be assertive action to keep renters in their homes now. But this report also speaks to the need for a housing policy framework that offers long-term stability and upward mobility.”

The report offers several recommendations for how to prioritize an overhaul of the way federal, state, and local governments meet the nation’s housing needs. The analysis shows that wages for lower-income households have remained stagnant, suggesting that deeper and longer-term subsidies are needed by expanding HUD’s programs to offer housing assistance as an entitlement. Building more affordably, through zoning reform, property tax or density bonus incentives, and innovations in construction that can lower the costs of development, would help to make more market-rate housing affordable to moderate-income households. The analysis makes clear that expanded programs are also needed to combat labor market barriers to resident income growth.

To read the findings and more policy recommendations from the analysis, visit the Terner Center’s website here.