A Low-Income Housing Program Is Pouring Billions Into Housing Many People Can’t Afford |
On any given night, thousands of people sleep on the streets in Portland, Oregon. They seek shelter in tents, bushes and overpasses in a city that has struggled with one of the worst housing crises in the country.
Portland, like many cities, has raced to increase its supply of affordable housing by turning to a federal program that’s existed since the 1980s: the Low-Income Housing Tax Credit. It provides up to $15 billion worth of tax credits a year nationally to help developers build apartments. Portland supplemented the federal construction money with local dollars, creating incentives that were hard to turn down.
But to meet the affordability requirements, all the developers needed to do in most cases was put rents within reach of someone earning 60% of median income, an earnings threshold that equates to about $75,000 annually for a family of four. It turns out that this amount of rent is now close to what the typical Portland landlord charges without any subsidy.
The result of the federal tax credit has been a glut of apartments costing renters on the order of about $1,400 a month for a one-bedroom. That’s a manageable outlay for a family making $75,000 but nearly half the monthly income of someone who earns $35,000 at the local minimum wage.
Nearly 2,000 of Portland’s subsidized units sat vacant and unused at last count, as The Oregonian and Willamette Week have reported. The same situation has repeated from Seattle to the San Francisco Bay Area to Denver.
Economists and other academic researchers have been warning for decades that this was precisely the sort of problem that the Low-Income Housing Tax Credit was likely to create.
Studies have concluded that the program, which currently supports nine out of every 10 subsidized units built in America, is an expensive and ineffective way to house people who can’t afford it. Researchers have said it doesn’t subsidize housing deeply enough to reach truly low-income renters, so it produces housing in markets and at income levels that already have a surplus instead of filling a shortage.
Independent researchers have found little evidence it’s expanded the overall housing supply beyond what the market would have produced without it. Its complexity has birthed an industry of affordable-housing-focused developers, investors, lawyers and accounting specialists who profit off the tax credit. Between 1991 and 2024, a dozen studies concluded that many more people could benefit if the money were spent on rental vouchers, which let consumers, rather than the government, decide which landlords get tax subsidies. Estimates went as high as twice the impact for the dollar.
“The evidence is telling us this program is lacking its reason to exist,” said Kirk McClure, an emeritus professor of urban planning at the University of Kansas and a leading critic of the tax credit. “We should reform the program to make it work better.”
McClure and others have brought their concerns to Congress. He recommended diverting the money into rental vouchers for tenants, or else changing the tax credit’s rules to reward only developers who build units in genuinely short supply: those affordable to people at the very bottom of the income ladder.
The ideas never went anywhere. Instead, money for the tax credit has grown at a much faster rate than rental assistance vouchers since 2000, data from the U.S. Department of Housing and Urban Development and the U.S. Treasury shows. Rock-solid support from industries that benefit from the tax credit and both parties in Congress has made it the linchpin of U.S. housing policy.
“The program leverages housing market forces, entrepreneurial innovation and private accountability to increase housing supply,” former HUD Secretary Ben Carson told the House Committee on Oversight and Government Reform in 2025.
Among the tax credit’s other prominent backers are two Northwest Democrats on the Senate Committee on Finance, Ron Wyden of Oregon and Maria Cantwell of........