The U.S. General Accounting Office (GAO) has found that many occupants of low-income housing tax-credit units receive some type of rental subsidy in addition to the tax credit. These findings aren't surprising, since the tax credit is a relatively shallow subsidy that generally can only make units affordable to families at the top of the eligible-income range.

In tax-credit projects, at least 20% of the units must be available and affordable to families with incomes no higher than 50% of area median income, or at least 40% must be available and affordable to families with incomes at or below 60% of median. Rents on tax-credit units are limited to 30% of the income limit - that is, either 15% or 18% of area median income - but the rents aren't necessarily tied to the incomes of the actual tenants. Since in many cases projects are targeted to families with incomes below the program limit, they would have to pay more than 30% of their income for rent without an additional subsidy.

Analyzing a sample of 142,865 tax-credit units in projects placed in service from 1992 through 1994, the GAO found that 54,564 of the tenants, or 38.2%, received rental assistance. This total included 38,032 receiving project-based assistance, meaning the subsidy was tied to the property, and 16,532 with tenant-based assistance, which could be taken to another unit.

Families with some type of additional rental subsidy had significantly lower incomes than other occupants of tax-credit units. For units with income data, households with project-based and tenant-based rental subsidies had an average income of 26% and 24% of area median income, respectively, compared with an overall average for tax-credit unit occupants of 37 % of area median.

Affordable-housing problem getting worse The housing affordability problem for low-income renters is getting worse, according to a report by the U.S. Department of Housing and Urban Development (HUD). Analyzing data from the American Housing Survey (AHS), HUD found that the supply of rental housing affordable to "struggling" families declined by 372,000 units, or 5%, between 1991 and 1997.

Struggling families are defined as families with incomes no higher than 30% of area median income; a unit is affordable if no more than 30% of the families income is used for rent.

While the supply of affordable rental units was declining, the number of struggling renter households increased by 3%, from 8.61 million to 8.87 million, between 1995 and 1997. As a result, there were only 36 rental units available and affordable for every 100 struggling households in 1997.

"The affordability gap in rental housing is at crisis levels and continues to worsen," the report states. "The continued widening of this gap can be attributed in large part to the lack of federal appropriations for new housing assistance." The report notes that no funds were appropriated for additional Section 8 rent subsidy units from fiscal 1995 through 1998, though 50,000 additional Section 8 vouchers were funded in 1999.

"The sad truth is that more and more people working at low-wage jobs, as well as older Americans living on fixed incomes, are being priced out of the housing market as rents rise," says HUD secretary Andrew Cuomo.

Rural rental funds remain stable in 2000 The final version of the fiscal 2000 agriculture appropriations bill (H.R. 1906) keeps funding for the Rural Housing Service (RHS) Section 515 program at the fiscal 1999 level of $114.3 million. The bill also provides $640 million for rural rental assistance, to subsidize rents on RHS projects. The legislation provides $100 million for guaranteed multifamily loans under the Section 538 program, and projects funded under the Section 515 program receive direct loans from RHS.

Construction allowance proposed Lessees of commercial real estate could exclude construction allowances provided by their lessors from gross income under safe-harbor regulations proposed by the Internal Revenue Service. Under the proposed rules, a construction allowance would be excludable if the lease term is 15 years or less; the funds are used to construct or improve real property for use in the lessee's trade or business; and the funds are expended within eight and one-half months after the close of the taxable year in which the construction allowance is received. If a construction allowance doesn't satisfy the safe harbor criteria, it would still be excludable from the lessee's income if the lessor is determined to be the owner of the property, based on the facts and circumstances of the case.