Real estate investors who buy federal low-income housing tax credits have fared well with their investments in the recovery from the financial crisis. Affordable housing properties maintained high occupancies and strong operating incomes in most housing markets, according to “The Low-Income Housing Tax Credit Program at Year 25: An Expanded Look at Its Performance,” a December 2012 report from the accounting firm CohnReznick.

That’s because affordable housing is increasingly difficult to find.

“For those who think that our country has too much housing, the fact is that most markets have a shortage of rental housing,” said Fred Copeman, CohnReznick Principal and leader of the firm’s Tax Credit Investment Services (TCIS) practice. “When it comes to affordable rental housing, this report confirms that we have a critical shortage not only in our major cities, but across the entire country.”

Over the course of the past decade, the occupancy level in housing tax credit properties has consistently been approximately 96 percent. Occupancy rates rose to 96.6 percent in 2010, the most current year covered in the report. These properties are effectively fully-occupied, given the normal turnover of rental apartments. To break even, affordable housing properties typically require an occupancy rate of at least 87 percent, according to the study. That gives government-subsidized affordable housing properties a lot of room in their operating budgets, on average.

Tough times can help keep these affordable housing properties occupied. “Unfavorable economic conditions led to enlarged tenant bases across properties in their affordable housing portfolios,” according to the report.

The median debt service coverage ratio for housing tax credit properties also rose to 1.24x in 2010. That’s up from the usual median ratio of between 1.13x and 1.15x, where the rate has hovered at for a significant portion of the past decade, according to the report. The annual net cash flow per apartment unit also rose to $419 in 2010, up from $250 in 2008, $341 in 2009.

However, certain markets remain fragile and report a disproportionately larger share of both underperforming properties and persistent operating deficits-–meaning properties with occupancies rates below 90 percent or debt service coverage ratios below 1.0x. Out of the total set of 17,118 housing credit properties counted in the report, only 9.5 percent were “underperforming” in 2010, down from 12.6 percent in 2009. In past years, the percentage of underperforming properties has ranged from a low of 11.5 percent to a high of 18 percent.

These underperforming properties tend to be concentrated in parts of the country where the rents found on the unregulated market are not much higher than the subsidized rents at affordable housing properties. In a few such states, particularly in the Midwest and a few Southern states over 20 percent of the housing credit portfolio operated with physical occupancy below 90 percent during 2010, representing more than twice the national percentage.

“The vast majority of housing tax credit properties that slip into one of the underperforming categories do so for just a year and return to profitable operation in the following year,” according to CohnReznick.