Politicians have attempted to solve the affordable housing crisis plaguing the United States for decades. The policies enacted to solve the affordable housing shortage in the United States have changed over time, ranging from the government entering the business of building affordable housing to the government providing subsidies to low-income individuals. In 1986, as part of Reagan Revolution, Congress passed the Low Income Housing Tax Credit Program (LIHTC Program or Program), to provide tax credits to developers in order to incentivize them to develop affordable housing. In this note, the author discusses policies enacted by Congress, and in particular, evaluates the success of the LIHTC Program in achieving its stated purpose of meeting the American people’s demand for affordable housing. Although the Program has been widely successful in creating affordable housing, it has not yet solved the affordable housing crisis. The author concludes that, with a legislative fix, the Program can become more successful in achieving its stated purpose by expanding the eligible recipients of such credits.

Specifically, a change to the laws regulating REITs that would permit REITs to pass along the benefits of low-income housing tax credits to investors has the ability to unleash a greater demand for the credits. As a result of this change, there would be a greater number of entities demanding low-income housing tax credits. The increase in demand for tax credits, under the principles of economics, would translate into a greater supply of affordable housing developments. This legislative change would stimulate REITs and other investment trusts to apply for these tax credits, thereby yielding a larger production of more affordable housing. The author concludes that this legislative fix would enable the LIHTC Program to achieve its intended purpose of solving, or at least significantly mollifying, the affordable housing crisis.