Furthermore, Fang says, “The unique public-private partnership structure of the housing tax credit program supports a very low rate of foreclosures compared to any other type of real estate. Ultimately, the success of housing tax credit investments is collectively 'guaranteed' by stakeholders that share common goals.”

However, there are a few clouds on the horizon. The report cautions that due to market reaction to the uncertainty over corporate tax reform, the “value” of housing tax credit investments—i.e. the price at which housing tax credits trade—has generally fallen by over 10 cents between year-end '16 and the third quarter of this year. If the trend continues, CohnReznick says, properties financed with housing tax credits may be forced to borrow more money from other sources to make up the difference. This could eventually weaken debt coverage ratios and cash flows for tax credit properties.

To illustrate this point, the report looks back at what happens when tax credit prices rise, as they did in the years just before and just after the 2008 Recession. “As housing tax credit prices rose, new housing developments financed with housing tax credits needed to borrow less money to pay for the high cost of construction. For example, hard debt, requiring regular debt service payments, made up just 17% of the permanent sources of development financing for housing tax credit property placed in service in 2013.”

Nonetheless, the report cites “the solid structure of the housing credit program” as one of two foundational factors underpinning the tax credit program's success. The other, of course, “the already high and increasing demand for affordable housing.” With statutory authorization among the factors limiting the LIHTC's production power, and thus its capacity to meet that demand, Sens. Mary Cantwell (D-WA) and Orrin Hatch (R-UT) have reintroduced legislation to expand and strengthen the housing credit.

“The Affordable Housing Credit Improvement Act would increase housing credit authority by 50% over a five-year period, which would be a significant step toward addressing the rising national demand for affordable housing,” according to CohnReznick. “The proposed legislation also contains important provisions that support housing credit development coupled with multifamily housing bonds, which currently provide critical financing to roughly 40% of all housing credit units. CohnReznick supports this bill and actively works to educate elected officials on the value of this program.”