As we approach the expiration of key provisions of the Tax Cuts and Jobs Act (TCJA) in 2025, affordable housing advocates, LIHTC developers, and housing agencies are looking to capitalize on this critical opportunity to reshape the future of the Low-Income Housing Tax Credit (LIHTC) program. The potential reforms could significantly impact housing markets across the U.S., especially in states with the highest demand for affordable housing.
For LIHTC developers, this is not just a political event—it’s a once-in-a-generation chance to ensure the growth of affordable housing and to address the ever-widening gap between housing demand and supply.
Affordable Housing in Major State LIHTC Programs: A Growing Need
Among the states most reliant on the LIHTC program, California, Texas, Florida, New York, and North Carolina are seeing some of the most pressing demands for affordable housing. These states have high populations, significant urbanization, and growing housing crises, making them focal points for housing reform and development under the LIHTC program.
- California remains a key player in the affordable housing market due to its sheer size and demand. Cities like Los Angeles, San Francisco, and San Diego struggle with an ongoing shortage of affordable rental units despite the state’s large-scale investments in LIHTC projects.
- Texas, with cities such as Dallas, Houston, and Austin, also faces rapid population growth, driving the need for more affordable housing options. Texas has seen significant LIHTC investment, with many developments in rapidly growing suburban areas.
- Florida continues to see a boom in affordable housing projects, particularly in the Miami and Orlando areas. Rising rent prices and a growing elderly population make it critical for the state to expand affordable housing stock.
- New York, particularly New York City, is another hotspot for affordable housing investments. The state has been utilizing LIHTC effectively to finance low-income housing development in both urban and suburban areas.
However, North Carolina stands out as an important state for affordable housing development under LIHTC. Over the past decade, North Carolina has leveraged its allocation of LIHTC to help address its housing affordability crisis, particularly in rapidly expanding metropolitan areas and its rural regions.
Affordable Housing in North Carolina: A Spotlight on Key Counties and Cities
North Carolina’s affordable housing crisis is especially pronounced in its most urbanized areas, with Charlotte, Raleigh, and Durham experiencing significant population growth and increased housing demand. The state’s focus on LIHTC projects is crucial for addressing this gap, as the demand for affordable units far exceeds supply.
- Charlotte: The largest city in North Carolina, Charlotte faces challenges typical of fast-growing urban areas, including rising rent prices and an increase in housing demand due to an influx of new residents. The city has actively used LIHTC funds to expand its affordable housing stock. Areas like West Charlotte and the Eastland Mall site are seeing major redevelopment projects that include Charlotte affordable housing components.
- Raleigh: As the state capital and part of the rapidly expanding Research Triangle area, Raleigh has been one of the key beneficiaries of LIHTC funding. The city’s population growth has driven up housing costs, and affordable housing is increasingly difficult to find in neighborhoods like North Raleigh and Southeast Raleigh. Raleigh has used LIHTC to fund developments that cater to low-income families, veterans, and seniors.
- Durham: Durham, part of the Research Triangle, is also a key player in North Carolina’s affordable housing efforts. With growing interest from tech and healthcare industries, the area’s real estate market has become increasingly unaffordable. LIHTC projects in Durham and its downtown and surrounding areas are providing critical relief to low-income families.
- Mecklenburg County: Beyond the urban core of Charlotte, Mecklenburg County has seen substantial investment in affordable housing using LIHTC, especially in neighborhoods experiencing gentrification. Projects focused on creating mixed-income communities in areas like NoDa (North Davidson) and Plaza Midwood have been crucial in preserving affordable housing amidst rapid development.
- Wake County: Serving the Raleigh metropolitan area, Wake County is another central region for LIHTC investments. With the state’s booming tech industry attracting new residents, affordable housing initiatives, such as those in Cary and Apex, are essential to keeping up with demand and maintaining balanced growth in suburban areas.
- Guilford County: Housing developments in Greensboro and High Point, within Guilford County, are vital parts of North Carolina’s overall affordable housing strategy. LIHTC investments in these areas have helped create affordable rental opportunities for low-income individuals and families, particularly in areas with older housing stock in need of revitalization.
How North Carolina and Other LIHTC States Can Benefit from 2025 Policy Changes
The proposed reforms in 2025 could significantly benefit North Carolina and other major LIHTC states by:
- Increasing Allocation: Expanding the LIHTC allocation could help North Carolina fund additional affordable housing projects in fast-growing cities like Charlotte and Raleigh.
- Enhancing Bond Financing: By lowering the bond financing threshold, North Carolina could make it easier for developers to finance mixed-income developments in both urban and suburban areas, helping to create affordable units across the state.
- Improving Investor Confidence: Extending the carry-back period and enhancing placed-in-service deadlines would attract more private investors to fund LIHTC projects, further increasing the availability of affordable housing units across North Carolina’s cities and counties.
- Addressing the Rural Housing Gap: Reforms that address rural areas could lead to increased LIHTC funding for smaller, underserved counties such as Pitt County and Carteret County, where affordable housing needs are often overlooked.
Looking Ahead: 2025 and Beyond
As we move toward 2025, the potential changes to the LIHTC program offer an invaluable opportunity for North Carolina and other major LIHTC states to continue addressing their affordable housing challenges. By advocating for necessary reforms, such as increased funding, more flexible financing options, and policies that attract investor participation, LIHTC developers and affordable housing advocates can help shape a future where housing is accessible to all, regardless of income level.
North Carolina, with its rapidly growing urban centers and expanding suburban areas, will play a crucial role in the success of the affordable housing movement in 2025 and beyond. By capitalizing on the Tax Super Bowl and its transformative potential, the state can ensure that more families find safe, affordable places to call home.
