Characteristics and Dynamics of Homeless Families with Children. 2.2 Affordable Housing Programs


Since 1990, most of the growth in rental housing subsidy programs has been in affordable housing rather than assisted housing. The LIHTC was enacted in 1987 and, as of 2004, had produced about 1.2 million units of rental housing. In other words, the program is about the same size as the public housing program, and unlike public housing it continues to grow each year. The HOME program was enacted in 1990 and is a block grant to cities and states that can be used for a variety of purposes, including the production of rental housing and tenant-based rental assistance, as well as subsidies to homebuyers and homeowners.

Each year, authority to allocate LIHTC tax credits to developers of rental housing is issued to the states by the Internal Revenue Service, initially in an amount of $1.25 per capita, which was increased to $1.75 per capita in 2002 and indexed to inflation thereafter. The total annual tax credit authority (the equivalent of the program’s budget) is about $5 billion (Climaco et al., 2004). HOME is based on appropriated funds allocated to local governments and states through a needs-based formula. Its annual budget in recent years has been around $1.9 billion.

HOME. Sixty percent of HOME funds are allocated to local governments, and 40 percent are allocated to states. Only local governments large enough to receive a formula allocation of a certain size receive direct allocations. State funds may be used anywhere in the state, including within local government “participating jurisdictions.”

The use of HOME funds is based on a plan that each state or local participating jurisdiction must develop as part of the jurisdiction’s Consolidated Plan for using HUD funds. The Consolidated Plan process includes public hearings and other opportunities for input from advocates and provider organizations.

Most jurisdictions use a substantial part of their HOME allocation for the production of rental housing. Information is not available on the number of bedrooms in HOME units, but as of 2002, 48 percent of HOME rental production units served two to four people, and another 7 percent served five or more people (Turnham et al., 2004). Assuming that all of these units have two or more bedrooms, 55 percent of the HOME program may be usable by families with children, about 120,000 units as of early 2005. In addition, there is a “pipeline” of 66,000 HOME units with two or more bedrooms for which funds have been committed but which have not been completed. At current budget levels for the HOME program, funds could be committed for an additional 15,000 units with two or more bedrooms each year (Exhibit 5, based on HUD, 2005b).

As a “flat rent” program (with maximum rents generally 30 percent of 50 percent of area median income), HOME rental production does not necessarily produce housing that families leaving homelessness with limited earnings or benefit income could afford. However, a substantial fraction (42 percent) of units in HOME rental projects does serve households with incomes below 30 percent of area median income (HOME Program National Production Report, June 2005). In many cases, this is because of the families and individuals using Housing Choice Vouchers occupy the HOME units. About one-fifth (22 percent) of HOME rental production units are occupied by households with tenant-based assistance, and another 18 percent have some other type of rental subsidy (Herbert et al., 2001).

Thus, there are only a few HOME rental production units (probably less than 5 percent) that do not also have an assisted housing subsidy but nonetheless have flat rents low enough to be affordable for poor homeless families.

In addition to rental production, state and local participating jurisdictions may use HOME funds for tenant-based rental assistance similar to vouchers. Tenant-based rental assistance is a relatively small use of HOME. About 15,000 units are subsidized each year, typically for 2-year periods, with a total of 123,000 households ever subsidized as of 2005.9 Sixty percent of the households using HOME tenant-based rental assistance have two to four members, and another 12 percent have five or more members (Turnham et al., 2004). As of 2004, it is estimated that 22,000 families with two or more members were using HOME tenant-based rental assistance. HOME tenant-based rental assistance it is heavily used for households with extremely low incomes: 81 percent have incomes below 30 percent of area median.

There is anecdotal information that HOME tenant-based rental assistance is often used for special needs housing and that participating jurisdictions’ choice to fund tenant-based assistance results from demand for that use by advocacy and provider groups. It is not known whether this is permanent supportive housing or mainstream permanent housing targeted for use by families and individuals with special needs.


HOME Rental Production

HOME Tenant-based Rental Assistance1

Low Income Housing Tax Credit2

Exhibit 5:
HOME and Low Income Housing Tax Credit units that could serve families with children

Two bedroom or two to four people




Three bedroom or five or more people




Total family 2004




Annual turnover


Not applicable


Pipeline as of 2004


Not applicable


Annual increments 15,000

Not applicable

1Assumes all tenant-based rental assistance used by more than one person serves families. The total two- or more bedroom units is an estimate of the number of units under subsidy at a point in time. HOME tenant-based rental assistance typically is only committed for 2 years, so the total commitments since the beginning of the program, 123,000 as of 2005, do not equate to a current program size. It is assumed that incremental use of HOME for tenant-based rental assistance sustains the current program level by renewing subsidies for current households.

2It is assumed that the size distribution of units placed in service 1987-94 and 2003-2004 is the same as the size distribution of units placed in service 1995-2002.

LIHTC. States use their annual allocations of LIHTC authority on the basis of a Qualified Allocation Plan (QAP) that, like the Consolidated Plan that informs the use of HOME funds, provides an opportunity for public input. There is no national administrative data on LIHTC. HUD conducts each year a survey of the state agencies that administer the LIHTC program, collecting information on some of the characteristics of the rental developments placed in service that year, including the number of bedrooms in each unit in the development and the development’s address. A survey conducted in the early 1990s by the General Accounting Office (GAO) provides the only information on the occupants of LIHTC developments, and that information is both limited and dated.

Thus, little information is available on the incomes of the households occupying LIHTC units (other than the presumption that, when they moved in, they had incomes below the program’s usual limit of 60 percent of area median income) or on the rents actually charged in LIHTC developments (as distinct from the maximum rents permitted by the program rules, usually 30 percent of 60 percent of area median income). Approximately 40 percent of all LIHTC developments placed in service between 1995 and 2002 have at least one household using a Housing Choice Voucher (Climaco et al., 2004).

The administration of the LIHTC program on the state level should provide an opportunity to coordinate the development of LIHTC housing with state programs focused on mental health, developmental disabilities, substance abuse, and other special needs. The extent to which LIHTC is used by states for developments targeted for occupancy special population groups is not known, although there is anecdotal evidence that some states create set-asides of this nature.10 LIHTC developments—or set-asides of units within developments—could be used either for mainstream permanent housing or for permanent supportive housing.

About 30 percent of LIHTC developments have nonprofit sponsors. Developments with nonprofit sponsors may be particularly likely to serve families with vouchers or to set rents lower than the LIHTC maxima on the basis of multiple sources of subsidy, often including HOME funds. Besides HOME, other supplementary subsidies that can make it possible to cover a development’s costs at rents that are more affordable for families with extremely low incomes include the Federal Home Loan Bank Board’s Affordable Housing Program (AHP) and the Community Development Block Grant (CDBG) program. Nonprofit owners may be especially willing to agree to long-term rental arrangements with providers of services for special needs populations.

The data set based on the annual survey of state agencies provides information on the number of LIHTC units placed in service between 1995 and 2002 that have multiple bedrooms. Based on that information (Climaco et al., 2004), Exhibit 5 provides estimates of the numbers of LIHTC units with two bedrooms and with three or more bedrooms placed in service between the first year of the program and 2004. As of 2004 there were a total of 880,000 units that potentially could be occupied by families with children.

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