Arizona Discontinues Low-Income Housing Tax Credit Program Amid Standoff

Arizona has recently taken a significant step by becoming the first state to discontinue its low-income housing tax credit program, which was initiated only a few years ago. Introduced in 2021 by former Governor Doug Ducey, the program was designed to provide tax incentives to developers who contribute to affordable housing initiatives.

As of December, the program is set to expire due to a lack of legislative support for its expansion this year. Learn more about the expiration.

State Representative Sarah Liguori (D-Phoenix) expressed her disappointment, stating, “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.”

Currently, Arizona operates one of 31 state-level low-income housing tax credit (LIHTC) programs in the U.S., which has expanded since its inception. To be eligible for these tax credits, developers must designate 40% of their units for renters earning 60% or less of the area median income, or 20% for those making 50% or below. More information on the eligibility criteria can be found here.

Despite receiving some bipartisan support, the future of the program remains uncertain as Governor Katie Hobbs cited the lack of a Republican sponsor essential for the program's continuation. “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,” she said. However, she noted the necessity for bipartisan cooperation, indicating that there was no Republican willing to support the initiative despite previous endorsements.

Opposition to the program has come prominently from Senate President Warren Petersen (R-Gilbert), who preferrs broad-based tax reductions over targeted programs like LIHTC. He made his position clear, indicating he does not support the program's expansion.

Representative Liguori remarked on a larger pattern of legislative inactivity concerning housing, saying, “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 the 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 level, the federal LIHTC program was established in 1986 during President Reagan’s administration and continues to operate in Arizona. The state program, which had an annual budget of $4 million aimed at affordable housing, had resulted in the creation of over 1,500 homes within the state, including allocations for rural areas, as reported by economic consulting firm Elliott D. Pollack & Company.