As we all know, there are numerous items to think about when choosing a market to develop/invest in. Due to the requirements of the Low-Income Housing Tax Credit (LIHTC) program and the Indiana Housing and Community Development Authority (IHCDA), having a good understanding of the market/region you are looking to develop/invest in is a critical step in developing a successful LIHTC property and one that we here at Bowen National Research look forward to helping you with.
One of the more important factors to consider is the location of recently allocated Tax Credit projects as this can give an idea as to where Tax Credit investment is popular, while also illustrating areas where developers may want to use caution due to recent and/or multiple allocations. Understanding the proximity of your site to other allocated projects can help ensure you do not develop/invest in an area that may be saturated in terms of LIHTC product and/or help to identify potentially underserved areas. Between 2016 and 2019, IHCDA has awarded LIHTC allocations to 79 different projects throughout the state of Indiana. While these projects are scattered throughout the state, the cities of Indianapolis (9), Fort Wayne (8), and Evansville (6) have been awarded the most allocations during the past four years. For a full list of allocated projects, reference the IHCDA website here. You can also identify allocated LIHTC properties in your market by selecting the LIHTC data set under the “housing” tab on the Policy Map website here.
Other important factors to consider include demographic and economic trends as well as the performance of existing LIHTC developments within the market being considered. Of course, these metrics will fluctuate from market-to-market. In general, however, markets with high concentrations of lower- to moderate-income renter households and/or lower-wage paying occupations often result in strong support for LIHTC product. Another demographic characteristic to look for is a market(s) in which a relatively large share of households, particularly renter households, pay a disproportionate share of their income towards rent as these households are considered rent overburdened and would benefit from the addition of more affordable rental product. Typically, households which pay more than 35% or 40% of their income towards rent are considered to be rent overburdened. As a whole, the state of Indiana will continue to experience demographic trends conducive to LIHTC development over the next several years as more than half of all renter households are projected to earn less than $40,000 through 2023 and nearly 36% of all renter households are considered to be rent overburdened paying more than 35% of their income towards rent.
The state of Indiana also shows trends conducive to affordable senior (age 55+) rental product, as more than one-quarter of all renter households will be age 55 or older in 2023 and more than 60% of these senior renter households will earn less than $30,000. In fact, senior renter households (age 55+) are projected to increase by more than 6,500 households, or 2.8%, within the state between 2018 and 2023, as compared to renter households under age 55 which are expected to decline slightly during this time period. This suggests that many markets throughout the state could likely benefit from and/or see increased interest in the development of senior LIHTC product in the very near future. To review demographic characteristics of your market, review the tools offered under the “demographics”, “incomes and spending”, and “housing” tabs on the Policy Map website here, and/or Census and American Community Survey data offered here.
While the preceding provides some good starting points to help determine LIHTC development potential in a market you may be considering, contact Bowen National Research to obtain more detailed information for your specific Indiana market. Our experience and proximity contributes to our knowledge of markets throughout the state of Indiana. In the past three years (2016-2018), Bowen National Research has conducted 60 market studies for 4% and 9% IHCDA Tax Credit application submissions, as well as 24 additional non-state-formatted market studies throughout the state of Indiana. Contact us to schedule your market study and/or for preliminary feedback/data on a market you may be considering for the upcoming July 29th, 2019 IHCDA deadline. Our database of surveyed LIHTC properties throughout the state of Indiana makes it easy for our staff to provide quick feedback on occupancy and rental rates. We look forward to assisting you in any way that we can to provide quality and affordable housing throughout the Hoosier State! In the meantime, don’t forget to review the latest IHCDA Qualified Allocation Plan (QAP) which can be found here.
Blog written by Craig Rupert, Market Analyst with Bowen National Research