Myths and Realities Outlined in American Dream Come True
By Tony Bertoldi, Co-President of CREA, LLC and author of American Dream Come True: Why Affordable Housing Is Good Policy, Good Business, and Good for America
American Dream Come True is written with the purpose of debunking common misconceptions and myths about affordable housing. In doing so, it becomes clear what affordable housing really is and the impact it has on policy, business, and all Americans.
MYTH: All Affordable Housing Programs Are Made Equal
REALITY: There Are a Variety of Housing Programs
To accurately understand affordable housing and debunk the myth that they are all basically the same, it’s important to distinguish the different types of affordable housing programs.
Public Housing: Public housing includes government-owned and managed properties by local Public Housing Authorities (PHAs). While initially formed to address housing for low-income families, seniors, and people with disabilities, public housing has gained a poor reputation and is often referred to as “the projects.”
Rent Control: Rent control is a program that limits the amount a landlord can charge for rent. While that may sound beneficial, it’s one of the worst ways to achieve affordable housing. Why? Rent control also limits supply—which ultimately is bad for the market. If there’s one takeaway from American Dream Come True, it is this: restrictions on the supply of all housing is the root cause of rising housing costs.
Section 8: Section 8 is part of the Department of Housing and Urban Development (HUD), but it’s a rent subsidy program administered through local PHAs. One key difference of Section 8 is that some voucher recipients can choose any housing that meets the program requirements. In other cases, the contract is directly with the property.
LIHTC: Finally, we’ve arrived at the affordable housing holy grail. Low-Income Housing Tax Credit (LIHTC) is a private-public program authorized by the US government but managed and operated by private developers, investors, and syndication companies. These partnerships are then managed and overseen by syndicators and the state’s allocating agencies. We’ll get into some of the nuts and bolts of this, but syndicators like CREA essentially serve as a conduit between the developer and investment side of the equation.
Since HUD and PHAs are more administrative, they don’t have the same level of resources - especially funding – for proper asset management. LIHTC, on the other hand, enables fund and investment entity resources to build and support properties where residents actually want to live. You’ve likely driven past a LIHTC property and not even realized it. The difference between a LIHTC and a market-rate property is often not a visible one.
Further, one advantage of LIHTC is local economic impact through job creation. A study performed by the National Association of Home Builders (NAHB) found that “for every 1,000 rental apartments developed approximately 1,130 jobs are supported for a year.” One could consider LIHTC as Impact Capitalism: capitalist real estate ventures designed to improve American lives. In turn, these “ventures” improve their community—and economy—as a whole.
MYTH: Affordable Housing and Public Housing Are Synonymous
REALITY: Affordable Housing is NOT Public Housing