March 24, 2020

Job Loss Pain Will be Felt Across the Affordable Housing Industry during COVID-19

Eight days. That’s how long it is until rent is due for millions of people across the country. With the economy shedding jobs at an unprecedented rate, and stores, bars and restaurants, and nonessential businesses shuttered indefinitely, the coronavirus continues to take its toll – physically, emotionally and financially.

No group is likely to feel the financial effects of this public health crisis more than hourly wage earners, sending ripple effects through the economy and jeopardizing the operation of affordable housing across the country. Although data are inconsistent across states, we estimate that over 60 percent of the over 3 million households1 living in Low-Income Tax Credit (LIHTC) properties do not receive any other form of rental assistance.2 While some of these tenants are elderly or disabled and rely on limited fixed incomes, many others depend solely on wages to pay their rent.

These households are some of the most vulnerable in society. The median income of a household in a LIHTC-assisted home is just $17,470. One missed paycheck may lead to missed rent and utility payments, especially since these households are among the least able to weather economic shocks. Prolonged income loss could lead to evictions and eventual homelessness. Just how many low-income workers will be affected is impossible to say. News reports say job loss forecasts for April range from 500,000 to 5 million, and the lowest income wage workers in high-contact jobs, like cashiers and waiters, may bear a disproportionate financial hit.

The national discussion has been focused on anti-eviction and other short-term relief measures, and these policies are critical to protecting people from immediate financial and health crises. But we also must plan for long-term solutions that include relief for the providers who house them. To keep vulnerable families in their homes, we must find ways to mitigate the collective impact of missed rent payments on owners and operators so that affordable properties can continue to operate and serve.

LIHTC properties are the most widespread form of affordable housing and provide a vital service to millions of low-income people. Most properties already operate on thin margins and are now taking on additional costs for disinfecting their buildings. In just one example, the owner of a development serving low-income seniors has reported at least $250,000 in unbudgeted cleaning expenses over the next several months.

Although we cannot predict how many low-income households will lose their source of income over the coming months, even a small percentage could have substantial negative impact on the affordable housing industry – potentially resulting in billions of dollars in lost operating revenue. Within Enterprise’s own asset management portfolio, we know that LIHTC operators can usually expect approximately $9,500 per unit per year, or $792 per month, in rent revenue to cover operational costs.3 Assuming similar rent levels across the industry, the chart below roughly estimates the per-month losses to property operators based on the share of 3 million tenants who could miss rent payments.

Without federal intervention and relief, this loss of operating revenue could result in delayed maintenance, possible defaults, and in worst case scenarios, the loss of thousands of affordable homes for those who need them most. At the same time, construction delays and disruptions to the pipeline of new affordable housing construction could mean fewer new units coming online in the upcoming months or years.

In order to maintain the essential safety net provided by LIHTC operators and other affordable housing owners, Enterprise is urging Congress to take bold action to provide flexible grants, tenant relief, and expand appropriations for critical housing programs. Moves already taken, like mortgage relief for multifamily property owners that suspend evictions, are a step in the right direction. These immediate actions can contribute to long-term safety and stability for millions of America’s most vulnerable families during this period of national crisis and uncertainty.

Demographic data on LIHTC units is only available based on units reported through 2015. HUD currently reports 3.13 million housing units placed in service through 2017, and we assume a 4 percent national average vacancy rate to estimate the number of households currently served.
Enterprise analysis of data published by the U.S. Department of Housing and Urban Development in "Understanding Whom the LIHTC Serves, Data on Tenants in LIHTC Units as of December 31, 2015" report. Published March 2018.
Based on analysis of Enterprise’s portfolio under asset management, including 1,400 LIHTC projects across 49 states, the District of Columbia and Puerto Rico. In 2018, these projects represented more than 106,000 homes. Within this portfolio, the median per unit revenue was $9,500 in 2018.

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