Some see LIHTC as devaluing conventional properties by offering below-market rent opportunities. Others view it as some sort of government handout.
But the federal government’s three-decades-old program for encouraging the investment and development of affordable rental housing for low-income households looks different to those who see it up close every day.
One is Chamberlan Carothers, Managing Director and Co-owner of the Hattiesburg, Miss.-based SVN Southgate Realty.
“When I see the benefits of LIHTC, I don’t see it as a benefit to just one individual as much as I do an entire family or generation,” says Carothers. Looking at the situation on a macro scale, analyzing the five-to-10-year impacts rather than year over year, he adds, illustrate the “trickle up” effect LIHTC has on the entire apartment housing sector.
Growing up the son of an apartment property manager, Carothers says he’s been involved with apartments his whole life and recalls changing air filters during the summer when he was 14. Nowadays, he leads Southgate, which serves the entire Gulf South region, managing more than 850 units between 18 communities, in addition to retail and office space.
“Today, we have more than $11 million in LIHTC properties for sale—properties [we want to see] sold and fully developed for the benefit of our business, but also for our state,” says Carothers. “Mississippi has the highest poverty rate in the nation at 22 percent. This figure is even more alarming when you couple it with the fact our state doesn’t have any primary or secondary markets, [which] attract more investor eyes to their markets as a whole.”
With more eyes on a market, adds Carothers, a community greatly increases its likelihood to have creative investors see opportunity in what might normally be considered a problem. A rural state such as Mississippi doesn’t get that level of exposure, nor does it have many of the types of large corporations that typically contribute support to their local communities in other markets. The lack of investor attention, says Carothers, makes the benefits of LIHTC that much more important to Mississippi.
As for that “trickle up” effect, Carothers notes that people coming out of poverty situations and into quality housing by default adapt to being more hirable and involved in the community. This improved workforce will attract more companies, jobs and the white-collar jobs that also come along, he says. “You then have a LIHTC program creating job growth in multiple tax brackets and bringing more consumers into your market. When you can show this path to growth, you bring more conventional owners over to support what they first viewed as a handout.”
And, as Washington lawmakers consider a tax code overhaul this year, how would scrapping LIHTC affect residents, properties and businesses like Southgate?
“Imagine the state with the highest rate of poverty losing its greatest opportunity for supplying housing to more than 20 percent of its population,” he laments. “The most tragic part to such a scenario is the fact that Mississippi is on a path to see growth over the next decade. It would be devastating to see that growth not come simply because we couldn’t provide housing to a ready and willing workforce.”
Despite Mississippi’s economic difficulties, Carothers says he’s “incredibly bullish” on the state’s 10-year prospects. With a cost of living 16 percent lower than the national average, being a “right to work” state and having quick access to the Gulf’s deep water ports, Mississippi stands to see an influx of manufacturing and industrial growth. And the large percentage of the families who will fill these jobs are the same families most likely to benefit from LIHTC, he says.
In light of that, Carothers says his message to lawmakers is to look at the long-term benefits. “They need to see [LIHTC] for what it truly is — a great economic driver to communities as a whole, and not just properties or individuals.” If Congress gets that message, he believes they’ll see that LIHTC benefits the bottom line growth of everyone in the market.