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# How Affordable Housing Lease-Up Challenges Invite Us to Think Differently about Program Design
- URL: https://prracperspective.ghost.io/how-affordable-housing-lease-up-challenges-invite-us-to-think-differently-about-program-design/
- Published: 2026-11-02T15:00:00.000Z
- Updated: 2026-11-02T15:00:02.000Z
- Author: Poverty & Race Research Action Council
- Tags: abundance, housing affordability, LIHTC, vacancy, multifamily distress, tenant screening, operating subsidy, Project-Based Vouchers, Project-Based Rental Assistance, housing choice vouchers

*By Thomas Silverstein, President/Executive Director, Poverty & Race Research Action Council* 

One recent mini-trend in news media [coverage](https://www.nbcnews.com/news/us-news/poorest-us-cant-find-housing-even-low-income-units-sit-empty-rcna596446?ref=prracperspective.ghost.io) of affordable housing is the proliferation of articles about income-restricted units in new Low-Income Housing Tax Credit (LIHTC) developments sitting vacant. While it would be a mistake to assume that such lease-up issues a nationwide phenomenon, it is undoubtedly true that there are some regional housing markets that have added a lot of multifamily housing stock in recent years – including [Denver](https://sentinelcolorado.com/metro/the-poorest-in-the-us-including-metro-denver-cant-find-housing-even-as-low-income-units-sit-empty/?ref=prracperspective.ghost.io), [Portland](https://www.oregonlive.com/business/2026/07/months-after-promises-to-fill-1900-empty-affordable-apartments-numbers-havent-budged.html?ref=prracperspective.ghost.io), and [Salt Lake City](https://buildingsaltlake.com/lihtc-still-pencils-despite-shaky-conditions-were-so-overbuilt-in-salt-lake-city/?ref=prracperspective.ghost.io) – where vacant, newly constructed affordable units are an issue. Housers should be concerned about this issue for two key reasons: (1) the vacancies exist alongside continuing housing precarity among extremely low-income households and unhoused people suggesting a misalignment between public resources and need and (2) the lack of rent revenue from vacant units threatens the financial viability of these developments, increasing risk of loan default or disinvestment in property maintenance. The good news is that policymakers and the affordable housing sector have the tools to address the policy design drivers of this problem. This post explores potentially fruitful areas for innovation and reform. 

An important explanation for lease-up challenges is that there are specific low-income levels, such as 50% or 60% of the Area Median Income (AMI), where there is sufficient supply to meet demand right at that income level while households somewhat [below](https://www.propublica.org/article/low-income-housing-tax-credit-portland?ref=prracperspective.ghost.io) or above that income may be ineligible for LIHTC units. But the population of households that make less than 80% of AMI is not clustered in a big bulge around 50% or 60% of AMI. Cost-burdened or over-crowded households making, say, 65% of AMI may then be screened out of LIHTC because their incomes are too high, while a household making 35% of AMI may be screened out because the owner applies an [income test](https://american-apartment-owners-association.org/property-management/rent-to-income-ratio/?ref=prracperspective.ghost.io) (for instance, requiring households to make 2.5 or three times the rent) that they cannot pass. These nuances have fair housing implications as, depending on the region, Black, Latine, indigenous, and disabled households, as well as female-headed households, may be more heavily represented among households with incomes at or below 30% of AMI that are screened out of LIHTC units (unless they have a housing voucher or a project-based subsidy is attached to the unit) than they are among households at 50% or 60% of AMI. 

[Income averaging](https://www.novoco.com/notes-from-novogradac/implementation-lihtc-income-averaging?ref=prracperspective.ghost.io) – which has been allowed in the LIHTC program since 2018 – can help with this problem to a degree. Under income averaging, owners set rents at levels that are affordable across a range of 10% increments from 20% of AMI to 80% of AMI so long as, on average, rents are at or below levels affordable to households at 50% or 60% of AMI. If LIHTC owners in markets with lease-up challenges are not taking this approach, they should at least seriously consider doing so. Fundamentally, it solves the problem of the hypothetical households at 35% and 65% of AMI described above. 

But we should not consider income averaging a panacea. For one thing, the ability to do income averaging – without additional subsidy – depends on there being demand for LIHTC units among households with incomes between 60% and 80% of AMI. In relatively low-cost markets, it just may not be the case that a considerable number of those low-income households are interested in LIHTC units. They may be able to afford homeownership, and they may have [options in the private rental market](https://nlihc.org/sites/default/files/gap/2026/gap-report%5F2026%5Fenglish.pdf?ref=prracperspective.ghost.io) that do not leave them cost burdened but do relieve them of the need to navigate administrative burdens like recertification. For households with options, there can be circumstances under which residence in affordable housing actually leaves them less stable over the long haul, not more, especially if they anticipate future increases in income. 

What then? These may be easier said than done, but there are two main options. First, the owner (and the allocating agency) can accept the reality that it makes sense to have multiple tiers, but those tiers need to range from 20% of AMI to 60% of AMI rather than all the way to 80%, with the result that the average rent is affordable at income levels that are lower than the maximum allowable. Doing this simply requires more subsidy per unit developed. That is a real trade-off, but it is a more obviously worthwhile trade-off in a market where more expensive LIHTC units are sitting vacant. Second, [Project-Based Voucher](https://www.cbpp.org/research/housing/project-based-vouchers?ref=prracperspective.ghost.io) or [Project-Based Rental Assistance](https://www.cbpp.org/research/housing/section-8-project-based-rental-assistance?ref=prracperspective.ghost.io) contracts could allow for income-based rents and thus make units that are out of reach of households making 35% or 20% of AMI, for instance, affordable. The problem with this obviously sensible solution is the scarcity of the underlying project-based subsidies as a result of [underfunding by Congress](https://nlihc.org/federal-budget-and-spending?ref=prracperspective.ghost.io). Still, in virtually no regional housing market in the U.S. should a LIHTC owner have difficulty leasing up a unit that is underwritten at 50% of AMI but that has a Project-Based Voucher attached, no matter how saturated the 50% of AMI segment is. 

This dynamic should be just one additional motivation for a shift in affordable housing programs back toward deep subsidy programs – whether project-based or tenant-based – like [public housing](https://www.cbpp.org/research/public-housing?ref=prracperspective.ghost.io), [Housing Choice Vouchers](https://www.cbpp.org/research/housing/the-housing-choice-voucher-program?ref=prracperspective.ghost.io), and Project-Based Rental Assistance. Although these programs tend to serve relatively few households at 50%, 60%, or 80% of AMI, their fundamental program design can be used to do so. And their advantages for serving extremely low-income households are emphatic. If we were able to get back to having new construction Project-Based Rental Assistance developments but perhaps with a higher maximum income than one might typically see, it is almost impossible to imagine lease-up challenges occurring. But Congress needs to put the money on the table (or state legislatures need to do so for [analogously structured programs of their own](https://www.cbpp.org/blog/state-and-local-policymakers-should-invest-in-state-funded-rental-assistance-to-solve-the?ref=prracperspective.ghost.io)). 

In sum, adopting income averaging where it has not been adopted, accepting the trade-off of fewer but more deeply affordable units, attaching project-based subsidies, and ultimately shifting our primary affordable housing production mechanism to programs that use income-based rents are all steps that have potential for avoiding the localized lease-up challenges highlighted in recent media coverage. Taking these steps has the potential to reduce the risk of financial distress in LIHTC developments, instill public confidence in the worthwhileness of investments in affordable housing (which is eroded by units sitting vacant), and further fair housing.