[December 15, 2014]

CohnReznick Study Confirms Ongoing Success of the Low Income Housing Tax Credit

The low-income housing tax credit has enjoyed a universal improvement in property performance, confirmed a survey collecting data from thirty-two housing tax credit syndicators and three of the nation's largest affordable housing investors. The survey and resulting report, prepared by CohnReznick LLP, one of the nation's leading accounting, tax, and advisory firms, is titled "Housing Credit Property Performance: A Performance Update Analysis" and is now available for review at www.cohnreznick.com.

The survey and detailed report follows a long-term effort by CohnReznick to measure the performance of housing tax credit properties. This most recent study is the third in a series of reports published over the past four years. An earlier study published in 2012, The Low-Income Housing Tax Credit Program at Year 25: An Expanded Look at Its Performance, reported a widespread critical shortage of affordable rental housing across the country. Two years later, this continues to be the case according to CohnReznick's latest report.

"The housing credit continues to generate solid investment and growth in this much needed segment of the marketplace," said Fred Copeman, CohnReznick Principal and leader of the Firm's Tax Credit Investment Services (TCIS) practice. "It's been an economic win for communities across the nation in need of additional affordable housing units."

The study shows that the national inventory of housing credit proprties continues to perform well across every type of project - large or small, urban, rural or exurban.

Among the report's key findings:

• Physical Occupancy - Occupancy rates have increased across the country since 2009.
• Debt Coverage Ratio - Improved financial performance continues. The average housing credit projects in all 50 states and territories are operating above breakeven.
• Per-Unit net cash flow - Cash flow, while still modest in amount, has continued to improve, doubling over the last six years.
• 4% tax credit properties are performing as well as 9% credit properties.
• Properties set aside for senior tenants outperformed the overall portfolio by all measures in 2011 to 2012 (occupancy, DCR and per-unit cash flow).
• Only 18.6% of properties operated below 1.00 DCR in 2012; as recently as 2002 this figure was 35%.
• Larger properties (101-200 units/property) had the lowest incidence of underperformance.
• Financial performance was more heavily influenced by geographic location than any other factor.

In a random survey of 20% of the executives that run asset management departments for study respondents, CohnReznick was able to glean some detail on the elements driving this positive performance. Besides favorable debt leverage and more sophisticated underwriting practices, they cite lower turnover and collection losses, as well as a general trend towards stabilization in rent and expense growth.

Data Sample

Data for more than 18,000 properties was contributed by 32 syndicators and three direct investors, which collectively represent:

• $76 B of equity investment and $80 B total housing credits
• 70% of all "actively managed" housing credit properties in the market - 1.4 M total units
• 85% were stabilized properties

Properties Analyzed

Of the more than 18,000 properties surveyed, the 2011-2012 operating data for the subset of 15,588 stabilized properties was analyzed. Stabilized properties were located in all 50 US states, the District of Columbia, Guam, the U.S. Virgin Islands, and Puerto Rico.

About CohnReznick

CohnReznick LLP is one of the top accounting, tax, and advisory firms in the United States, combining the resources and technical expertise of a national firm with the hands-on, entrepreneurial approach that today's dynamic business environment demands. Headquartered in New York, NY, and with offices nationwide, CohnReznick serves a large number of diverse industries and offers specialized services for middle market and Fortune 1000 companies, private equity and financial services firms, government contractors, government agencies, and not-for-profit organizations. The Firm, with origins dating back to 1919, has more than 2,700 employees including nearly 300 partners and is a member of Nexia International, a global network of independent accountancy, tax, and business advisors. For more information, visit www.cohnreznick.com.

About the Tax Credit Investment Services Group

The Tax Credit Investment Services (TCIS) group is a dedicated business unit within CohnReznick focused on evaluating and advising clients on tax-advantaged investments, low-income housing, historic rehabilitation, new markets and renewable energy projects. As a group made up of experts with a fairly narrow industry focus, TCIS covers a variety of consulting areas, including investment due diligence, investment and business strategy, and industry benchmarking research for the benefit of investor and syndicator communities. The TCIS team is composed of a multidisciplinary group of professionals, including CPAs, attorneys, financial analysts and other professionals with experience as state housing finance agency and commercial real estate executives. CohnReznick's TCIS team members have authored a number of affordable housing industry studies, speak regularly at industry conferences and have been widely quoted in the financial press concerning tax credit investments.

In addition to the professional experience of TCIS team members, the group's clients benefit from the knowledge and experience of hundreds of CohnReznick audit, tax and consulting professionals working on investment tax credit transactions on a daily basis.

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