KC Region at risk of losing its most affordable housing

The total number of active LIHTC units in the Kansas City region is facing a steep cliff. LIHTC properties built after 1990 account for 90% of active properties in the region. These are required to remain compliant with the U.S. Department of Housing and Urban Development's (HUD) affordability regulations for a full 30 years after they are built (with some exceptions  ³  ). But this means that the bulk of the region’s LIHTC units began having the option to roll off the program and offer the units at market rates beginning in 2020. From 1990 through the mid-2000s the number of new LIHTC units created increased each year on average, which means the number of units potentially rolling off the program will increase each year until at least the mid-2030s. If the region’s current low rate of LIHTC housing production continues, the region risks losing 72% of its peak LIHTC housing stock, reaching levels not seen since the earliest days of the program.

In the map on the right, you can see the locations of LIHTC properties, colored by a five-year anticipated roll-off range. About one-quarter (5,162) of the Kansas City region’s 20,538 active LIHTC units are expected to reach the end of their affordability period within the next five-year period.  

1 in 4 LIHTC units will become eligible to drop out of the program over the next five years.

The map at right animates the production of LIHTC properties over time and then illustrates where the impacts might be felt if they roll off the program at the end of their required 30-year affordability period. Of note is that the program began with properties mainly in the core of Kansas City, Missouri and Kansas City, Kansas, but then spread significantly to the suburbs. As a result, the potential reductions in affordable housing units from properties exiting the LIHTC program affects the entire Kansas City region.

To assess what is happening locally when properties pass their roll-off date, we examined properties scheduled to roll off in 2020. We were able to match four properties, two in Johnson County, Kansas, and two in Jackson County, Missouri, with 2022 rents from the private real estate data company, CoStar ^TM . We found that these properties' asking rents remained about half that of their submarket average and were increasing one-half to one-quarter as fast as the average submarket rate. Based on this anecdotal evidence, it appears that it is likely true that most properties in the area that roll off LIHTC properties will remain affordable.

However, even if the properties remain affordable based on rent, those exiting LIHTC are no longer required to rent to households with incomes below 60% of the area median. Instead, the units may be rented to households with higher incomes (who do not need the subsidy), effectively transitioning from low-income housing to workforce housing. If this is the case, then even if rents remain low, there would be a loss of attainable units for households whose incomes are at or below LIHTC income thresholds.

According to a  report  by Abt Associates commissioned by HUD, most older LIHTC properties are not at risk of becoming unaffordable. However, potential exceptions are those with for-profit owners in favorable market locations. Consider the map on the right to assess which properties might fall within these criteria.

(The map overlays LIHTC properties by roll-off date on a heat map of property values, with warm colors indicating  higher values. Click on the icon with the bulleted list in the bottom left- hand corner of the map to expose the legend.)

To assess which LIHTC properties might be most likely to experience rent increases once they roll off, we used the map to identify high-wealth areas where markets are typically strong. As can be seen in the map, several LIHTC properties with roll-off dates in the next five years are in close proximity to such areas. These are concentrated around downtown and along Troost Avenue and the Paseo Boulevard in Kansas City, Missouri. Though historically properties east of Troost have seen little appreciation in value, this has changed over the last decade or so. Areas along Troost have begun to experience redevelopment pressures that may make LIHTC properties near the corridor more likely to experience significant rent increases after they reach their roll-off date.

We can refine this analysis further by examining which properties are owned by for-profit entities and whether they combine LIHTC with other subsidy programs to lower rents further than they can with LIHTC alone. This latter characteristic indicates a stronger commitment to providing financially accessible housing.

The buttons below allow viewers to see what happens when properties are filtered sequentially by which ones might roll off soonest, are profit-oriented and have no other subsidy being utilized besides LIHTC. (Click on the button a second time to remove the filters.)

The result of this filtering shows a narrow set of properties, with several large ones along the Troost/Paseo corridor, as well as one in Olathe, Kansas, that are also relatively near high-wealth areas. This combination of attributes makes them more likely to increase their rents to take advantage of appreciating market rates once they roll off LIHTC. If they do, this would have a high impact on the stock of lower-cost rental units due to their size and how quickly such a conversion might occur. As a result, it makes sense to target these properties for preservation efforts.