Barriers to Affordability: Examining the Low-Income Housing Tax Credit’s Influence in Rural versus Urban Areas of Texas

Abstract

The Low-Income Housing Tax Credit (LIHTC) is a substantial initiative that has had a tremendous impact on the housing market throughout the United States. The tax credit was created due to the privatization of the affordable housing industry. With this privatization, the United States government created the Department of Housing and Urban Development (HUD) with the intent of subsidizing private owners/operators who work to create affordable housing. This program has been a tremendous success overall, but this study looks at the disparity of LIHTC in rural versus urban areas, specifically in Texas. Privatization often leads to profit maximization, and this profit maximization can hinder rural affordable housing development and preservation. Through a comparative analysis of two rural cities and two urban cities, this study shows that the rural cities have a disproportionately lower amount of LIHTC-funded housing units per capita. This disparity is then understood through the 2025 Texas Qualified Allocation Plan, and how several factors of the plan, such as amenity-based scoring and rents calculated based on Area Median Income, inadvertently favor urban cities. Looking at this disparity and the causes involved, Karl Polanyi’s concepts of “embeddedness” and “double movement” and Viviana Zelizer's concept of “relational work” provide a useful framework to understand how policy and profit maximization have mixed to create the spatial disparity. This study recommends policy changes that can even out the incentives for the private sector to operate in rural cities to help close the LIHTC disparity in rural versus urban cities.