Oregon Rent Increase Proposed Limit PDX Example: Tenants With High Income Growth Save as Much Tenants with Limited Income Growth and Could Crowd Out Lower Income Tenants.

I constructed two tables that attempts to show what the impact of a 5% rent increase limit would be for a 2 BR Portland Metro 60% MFI LIHTC unit from FY 2015-FY 2019.  

• For 2015 I used a starting 2015 income that was 10% less than maximum allowed ($3,000 monthly vs $3,300). That is because not all tenants are at the maximum income allowed. 
• For years 2015-2018 I used the actual income and rent limits.
• In 2019 I assumed a 7% growth in income and max rent which I believe is supported by changes in the ACS data already available and used by HUD as part of their income calculations. 

The first table shows the impact on a household whose income grows by 3% a year. 
The second table shows the impact on a household whose income grows by 10% a year. 

Observations;

1. Both households save a cumulative total of $1,237 because of the 5% rent increase limitation, with all of the savings coming in 2018 and 2019. 
2. In the case of the household with 3% income growth, their share of income for rent reduces very slightly from 33% to 32.96%
3. In the case of the household with 10% annual income growth their share of income for rent reduces much more substantially from 33% to 25.34%
4. In 2017, 2018, and 2019 the household with the 10% income growth has income ABOVE the maximum LIHTC level used for admission. This is entirely permitted for a 100% LIHTC project and below the 140% of max permitted in a partially assisted LIHTC project; my understanding is the MOST projects have 100% LIHTC. 
5.  If families with significant income growth get the same dollar rent reduction in rents as families with low income growth and also reduce their rent burdens substantially it seems likely that they would stay in their units longer. This could mean that over time more over income families would occupy their units longer thus reducing the availability of units for [lower income] families who are under the LIHTC income limits. 

Feedback encouraged; you can DM me at Twitter @oregonhousing

Originally created and posted on the Oregon Housing Blog.