The High Cost of 'Low Income Housing'

Many American cities need more low‐​income housing, but governments reduce supply and raise construction costs with regulations, taxes, and bureaucracy. The Wall Street Journal reports on a Los Angeles low‐​income project, Lorena Plaza, that has taken 17 years to complete because of neighborhood opposition, lawsuits, and zoning and environmental rules. The Plaza’s 49 units are costing $34.2 million to build, or about $700,000 each.

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The Journal describes state and local barriers to efficient apartment construction but does not address a major federal barrier—the low‐​income housing tax credit (LIHTC). The federal tax break is supposed to aid housing construction, but it adds many costs and complexities, as it likely did for Lorena Plaza.

Vanessa Calder and I described LIHTC failings in a 2017 study. The federal government distributes the credits to the states, which award them to developers to construct apartment buildings. The developers must cap rents for the units they set aside for low‐​income tenants. The states submit qualified allocation plans (QAPs) to the federal government, which micromanage LIHTC allocations and housing projects in huge detail.

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