Arizona is making headlines as the first state to dismantle its low-income housing tax credit program after establishing it just a few years ago. Initially set up in 2021 under former Governor Doug Ducey, this initiative aimed to incentivize developers through tax breaks to increase affordable housing.
This year, however, efforts to expand the program stalled in the state legislature, setting the stage for its expiration in December. Read more about the expiration.
“It is extremely disappointing, and you know developers and projects will pull out of Arizona and that pipeline will shrink in bringing affordable units online,” stated Rep. Sarah Liguori (D-Phoenix).
Currently, Arizona is one of 31 states, along with the District of Columbia, that have their own LIHTC programs. This represents a significant increase since Arizona’s program was initiated.
To qualify for the tax credits, developers must allocate at least 40% of their units as rent-restricted for tenants earning 60% or less of the area median income, or 20% of units for those making 50% or less. Further details can be found here.
Despite some bipartisan backing, Governor Katie Hobbs noted the absence of a Republican sponsor for the program’s continuation and expansion. “LIHTC has been a priority. We’ve seen the huge impact that those investments have had across the state and it’s something important that we’ll keep fighting for. Quite frankly, we need a Republican to champion it, and there wasn’t anyone that was willing to – even Republicans who had supported it in the first iteration that was passed in the state. So not something that we’re giving up on, we’ll continue to fight for it,” Hobbs remarked.
Senate President Warren Petersen (R-Gilbert) has been a notable opponent of the program’s expansion, favoring broad tax cuts over targeted measures like LIHTC. He expressed his stance earlier this year, indicating no support for the program.
Rep. Liguori pointed to a broader legislative trend of inaction on housing issues, stating, “My frustration lies in Arizona not understanding the importance of this program and the continuation of constructing affordable units across the state. We had a number of bills that addressed affordability and creation of units across the state … and none successfully made it over the finish line. It sets us up for potentially more housing insecurity in the next few years.”
On a national scale, the federal LIHTC program was introduced in 1986 during President Ronald Reagan’s tenure and remains available for use in Arizona. While the state program, which had a $4 million annual budget for affordable housing, is nearing its end, it has facilitated the creation of over 1,500 homes across Arizona, with a portion of funds dedicated to rural areas, according to economic consulting firm Elliott D. Pollack & Company.
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