The Future of Tax Credit Rental Housing in Indiana

Robert VogtSeptember 14, 2005

Where Are We Headed in Indiana?

• Interest rates are rising discouraging the flood of first time homebuyers

• Job opportunities are increasing• Rentals are becoming an

acceptable permanent housing alternative

• Occupancies are on the way up

Where Are the Opportunities?

• Where do we stand now?

• Where is the growth?

• Where is the supply?

• Where is the future

opportunity?

Penetration Rate Calculation

• Comparison of existing Tax Credit units with the number of income-qualified renter households

• Provides macro view of Tax Credit market

• Higher the penetration rate, less likely area can support additional Tax Credit product (saturation)

Penetration Rate Calculation

• Analysis ignores Tax Credit

government subsidized projects

(preservation deals)

• Analysis ignores family versus senior

units

• Project to 2010 to identify

opportunities

Estimating Future Demand• Estimate change in income-qualified

renter households• Source of data: HISTA (Household Income Size

Tenure Age)– Cross tabulation of multiple variables– Current year estimates and 5-year projections

• 2005 - 2010– Finer income bands designed for use in low-income projects

• $10,000 ranges up to $60,000– More reliable demand estimates than traditional techniques

• Evident in analysis of elderly where most households are less than 3-person

Estimating Current Supply• State lists (IHCDA web site)

– Units in existing LIHTC properties– Government subsidized Tax Credit

properties are lumped in with conventional Tax Credit

• Thorough field analysis needed to obtain exact supply numbers and verify LIHTC program participation

Qualified Income Range for Renter Households

Methodology• Qualified Income Range

– 2005 Income Limits– Max Income (60% 4-person max allowable

income)– Min Income (50% 1-bedroom maximum rent)– 35% Rent-to-Income Ratio

• For 2010, income range projections were adjusted to reflect increase in household income

Approximate Current Penetration Rates

• Higher estimated rates clustered in eastern/central Indiana

• Lower estimated rates in northwestern and southwestern Indiana

• Currently an estimated 10 Counties (10.9%) below 8.0% penetration

Approximate Current

Penetration Rates

Highest/Lowest Penetration Rates

Highest• Franklin (49.1%)• Blackford (47.2%)• Ohio (47.2%)• Rush (44.2%)• Dekalb (42.3%)

Lowest• White (0.0%)• Brown (0.0%)• Spencer (0.0%)• Daviess (2.3%)• LaPorte (2.8%)

Renter Occupied

Households Estimated

Change (2005-2010)

Renter Occupied Households Estimated Change (2005-2010)

Top 5 Counties• Hamilton (20.1%)• Hendricks (17.6%)• Johnson (10.4%)• Boone (10.3%) • Hancock (10.2%)

Bottom 5 Counties• Fayette (-5.5%)• Martin (-3.7%)• Wabash (-3.6%)• Perry (-3.4%)• Rush (-3.1%)

Renter Income Qualified

Households Estimated

Change (2005-2010)

Renter Income Qualified Households Estimated Change

(2005-2010)

Top 5• Hamilton (20.8%)• Hendricks (14.8%)• Boone (10.9%)• Whitley (8.8%)• Johnson (8.0%)

Bottom 5• Vermillion (-

13.5%)• Warren (-11.2%)• Fountain (-

10.6%)• Perry (-10.0%)• Fayette (-8.1%)

3+ Person Renter

Households Estimated

Change (2005-2010)

3+ Person Renter Households Estimated Change (2005-2010)

Top 5 Counties• Hendricks (21.1%)• Hamilton (17.8%)• Boone (12.0%)• Johnson (10.1%) • Hancock (10.1%)

Bottom 5 Counties• Martin (-8.7%)• Union (-6.5%)• Floyd (-6.4%)• Fayette (-6.3%)• Newton (-6.2%)

Renter Households Age 55+ Estimated Change (2005-

2010)

Renter Households Age 55+ Estimated Change (2005-2010)

Top 5 Counties• Hamilton (39.5%)• Hendricks (32.4%)• Brown (24.8%)• Porter (24.0%) • Crawford (23.9%)

Bottom 5 Counties• Perry (-2.8%)• Fayette (0.8%)• Benton (3.0%)• Jay (4.0%)• Martin (4.5%)

Approximate Future Penetration Rates (2010)

• Assumes no additional supply• Assesses effect of income qualified

household growth on current product supply levels

• Indicates potential for additional product

Approximate Future

Penetration Rates (2010)

Approximate Future Penetration Rates (2010)

Highest Penetration• Franklin (51.6%)• Blackford (50.1%)• Ohio (49.1%)• Rush (47.4%)• Dekalb (42.9%)

Lowest Penetration• Brown (0.0%)• White (0.0%)• Spencer (0.0%)• Daviess (2.3%)• LaPorte (2.8%)

Issues• Does not differentiate between

senior and family projects• Does not evaluate quality of

existing rental housing• Does not consider affordability of

other housing choices (including rental)

Issues• Does not analyze site specific

market areas• Does not consider current

occupancy rates• Does not account for government

subsidized Tax Credit units• Does not evaluate impact of HCVs

For Additional Information

Robert VogtVogt Williams & Bowen, LLC

869 W. Goodale Blvd.Columbus, OH 43212

www.vwbresearch.com

614.225.9500