A Low-Income Housing Program Is Pouring Billions Into Housing Many People Can’t Afford

# Low-Income Housing Tax Credit Program Funds Units Beyond Reach of Poorest Households

The federal Low-Income Housing Tax Credit program, which distributes billions annually to developers building affordable housing, systematically fails to serve the nation's poorest residents, ProPublica's investigation reveals. The program allows developers to set rents at 60 percent of area median income, pricing out households earning less than 30 percent of median income—the populations with the greatest housing need.

The tax credit program operates through state agencies that award credits to developers, who then sell them to investors for tax deductions. This structure creates perverse incentives. Developers maximize profits by building units at the highest permissible rent levels within program guidelines, not by targeting the neediest populations. The result: billions in public subsidy flows to housing that moderate-income families can afford, while deeply poor households remain priced out.

This misalignment between program design and stated purpose has persisted for decades. The Internal Revenue Code establishes the rent ceiling at 60 percent of area median income, a threshold high enough to exclude the most vulnerable. State housing agencies possess discretion to impose stricter limits but rarely exercise it, fearing developers will decline to participate if returns shrink.

The program distributes roughly $10 billion annually through tax credits. Portland's experience, examined by ProPublica, exemplifies the problem. While the city built substantial new units through tax credits, those units served households earning $40,000 to $60,000 annually, not families in crisis homelessness or earning less than $25,000 yearly.

Reforming the program requires policy action at multiple levels. Congress could lower the statutory rent ceiling to 30 percent of area median income, directly targeting the poorest households. States could impose stricter rent limits within existing authority. Developers could receive enhanced returns for serving lower-income