Low-Income Housing Tax Credit leaves Portland with vacancies

Portland’s surge in federally subsidized apartments has not translated into lower costs for the people who need help most. Under the Low-Income Housing Tax Credit, many units end up priced near market rates, creating a mismatch with low-wage households—and lea

On any given night, thousands of people sleep on the streets in Portland, Oregon—looking for shelter in tents, bushes, and overpasses in a city that has struggled with one of the worst housing crises in the country.

Portland has poured effort into building affordable housing. and it has leaned heavily on a federal tool created in the 1980s: the Low-Income Housing Tax Credit. Nationally, it provides up to $15 billion a year in tax credits to help developers build apartments. Portland has supplemented that construction money with local dollars, adding incentives developers say they can’t afford to ignore.

But the affordability promise has begun to fray where the need is sharpest.

To meet the program’s requirements. developers in most cases only have to keep rents within reach of people earning 60% of median income—a threshold that equates to about $75. 000 annually for a family of four. In practice, that level of rent is now close to what a typical Portland landlord charges without any subsidy.

The result, critics say, is a glut of apartments that land around $1,400 a month for a one-bedroom—numbers that can fit a family making $75,000, but reach nearly half of the monthly income for someone earning $35,000 at the local minimum wage.

At last count, nearly 2,000 of Portland’s subsidized units sat vacant and unused. The same pattern has repeated from Seattle to the San Francisco Bay Area to Denver.

Economists and researchers have warned for decades that the tax credit was likely to produce this kind of mismatch. Studies have concluded the program is an expensive and ineffective way to house people who can’t afford it: it doesn’t subsidize housing deeply enough to reach truly low-income renters. and it tends to fund building in markets and income tiers where there is already surplus—not in the places of deepest shortage.

Independent researchers have also found little evidence the program expanded overall housing supply beyond what the market would have produced anyway. Critics point to the complexity of the credit and say it has helped spawn an industry of affordable-housing developers. investors. lawyers. and accounting specialists who profit off the tax credit.

Between 1991 and 2024, a dozen studies concluded that many more people could benefit if the money were spent on rental vouchers—estimates that went as high as twice the impact for the dollar.

Kirk McClure, an emeritus professor of urban planning at the University of Kansas, put it more bluntly. “The evidence is telling us this program is lacking its reason to exist,” he said. “We should reform the program to make it work better.”

McClure and others have brought their concerns to Congress. He recommended diverting the money into rental vouchers for tenants—or. if lawmakers kept the construction model. changing the tax credit’s rules so developers only get rewarded for building units in genuinely short supply. meaning homes affordable to people at the very bottom of the income ladder.

Those ideas have struggled to gain traction.

Data from the U.S. Department of Housing and Urban Development and the U.S. Treasury show money for the tax credit has grown at a much faster rate than rental assistance vouchers since 2000. Rock-solid support from industries that benefit from the tax credit—and backing from both parties in Congress—has left the program as a linchpin of U.S. housing policy.

Former HUD Secretary Ben Carson argued for the credit in 2025 before the House Committee on Oversight and Government Reform, saying, “The program leverages housing market forces, entrepreneurial innovation and private accountability to increase housing supply.”

Two Northwest Democrats on the Senate Committee on Finance—Ron Wyden of Oregon and Maria Cantwell of Washington—are among the program’s prominent supporters. Cantwell has introduced bills to increase funding for the existing tax credit. while Wyden has proposed expanding the target of the credits to benefit not just low-income families. but also middle-income households. a direction McClure says is the opposite of what is needed.

Wyden and Cantwell say Congress should hold more hearings to ensure the program is run efficiently, but they also defended it in written statements to Oregon Public Broadcasting and ProPublica.

“There isn’t any silver bullet to the housing crisis in Oregon and around the country. ” Wyden’s statement said. “but the low-income housing tax credit has been the most successful federal housing construction program on the books for decades and is the only housing program Republicans haven’t tried to gut.”.

The political fight has unfolded as the White House and Congress weigh other housing proposals. President Donald Trump has sought to cut housing programs such as rent assistance. Still. Congress approved. as part of his spending package last year. the biggest expansion of the Low-Income Housing Tax Credit in decades.

“That’s a mistake,” McClure said.

In his view, it won’t alleviate homelessness or the housing shortage for people at the lowest incomes. It will instead create more buildings competing with the market—and with each other—for the same pool of renters.

He described seeing a brand-new affordable housing complex near his home in Kansas with a sign enticing tenants of another government-backed complex down the street, promoting newer units at the same price.

“So the taxpayers of the United States subsidized the creation of this new property to help bankrupt another federally subsidized property,” McClure said. “That is stupidity 101. We have got to be better stewards of the American taxpayer’s dollar.”

Portland’s officials and advocates are not standing still. Oregon’s affordable housing production has skyrocketed in recent years. Over the past decade. Oregon lawmakers doubled funding for the state’s affordable housing tax credit and started offering low-interest and deferred loans for construction. Voters in the Portland area approved housing bonds totaling more than $900 million—money developers can use to secure federal housing tax credits.

Before the pandemic, the state built about 1,800 affordable units a year. Last year, that number rose to nearly 5,000.

Industries that benefit from the federal tax credit say that growth is proof the program works. The Affordable Housing Tax Credit Coalition—representing lenders. developers. and others in the industry—has called the program “the most effective tool we have to meet the affordable housing needs in rural. suburban. and urban areas.”.

Jennifer Schwartz. director of tax and housing advocacy for the National Council of State Housing Agencies. said the housing market by itself won’t produce enough housing within reach for low-income renters—even for those who receive federal rent vouchers. “It costs too much to build housing to turn around and rent it to households who are low-income households. ” she said. “unless you have some sort of incentive like the housing credit.”.

But in Portland, construction has not eased the affordability crunch. A report from the Portland Housing Bureau in 2025 found that rent and home sale prices were growing faster than incomes, even as the city’s vacancy rate was also rising.

The vacancy rate was roughly 7.6% as of May. according to Aaron Kirk Douglas. director of market intelligence at the Portland-based brokerage HFO Investment Real Estate. Vacancies are even higher for ostensibly affordable units: 11%, leaving nearly 2,000 units unused. Housing industry experts consider 5% vacancy a baseline for ordinary turnover.

Officials and advocates point to multiple reasons units can sit empty. The time it takes to verify that a tenant’s income meets the tax credit’s requirements and prepare units for move-in played a role. Still, housing advocates say the biggest barrier is price.

The gap between market-rate rents and affordable housing rents has narrowed, not only in Portland. One industry estimate says that in more than a dozen U.S. cities, at least 40% of affordable housing was competing with market-rate buildings in 2025.

In Gresham, a Portland suburb, federal rules cap a two-bedroom apartment built with the Low-Income Housing Tax Credit at $1,675 a month. Zillow places the equivalent market-rate apartment at $1,525.

In northeast Portland. operators of a new $53.8 million development built with the tax credit and the local housing bond struggled to fill studio and one-bedroom apartments whose affordable rents were near market rate. They began offering a month of free rent for new tenants. according to a March report from the committee that oversees the region’s housing bond.

Affordable housing providers in Portland—predominantly nonprofit organizations—are also increasing their marketing budgets to attract renters away from market-rate buildings.

“The idea that we’re competing with the market would have been unfathomable a few years ago,” said Margaret Salazar, CEO of Reach Community Development Corporation, one of Portland’s largest affordable housing providers.

Salazar. who led Oregon’s state housing agency during the COVID-19 pandemic and later worked as a regional director for HUD. has long supported the Low-Income Housing Tax Credit. But she said the people who can afford the apartments produced through the credit would rather move into market-rate apartments for similar money and with fewer rules and restrictions.

“It’s becoming a slimmer and slimmer slice of residents” that Reach can serve, she said. “Suddenly we’re competing for this little slice of people.”

For a substantial group of Portland-area residents, that slice remains out of reach.

HUD data shows more than 90. 000 households in Multnomah County earn less than the 60% of median income that a family would typically need to afford a federally subsidized unit. The precise number of households who can’t afford “affordable” units is unclear. depending on variations in household size. actual rent levels. and other subsidies that might reduce rents further.

Salazar said Reach can rent to people at lower income levels only if it can find additional subsidies such as housing vouchers. But funding for vouchers is so limited that only 1 in 4 people who qualify are able to get them.

Supporters of the tax credit argue that the units it subsidizes remain valuable because the buildings it funds are constrained from raising rents faster than incomes—and because there is no guarantee market-rate rents will stay at their current level. Still. Steve Rudman. who ran the local housing authority in the Portland area for more than a decade. said the shift raises an existential question for the federal program.

“What is this thing really doing?” Rudman said. “What is the Low-Income Housing Tax Credit?”

The tax credit has always faced criticism. In the Reagan era, housing experts began to worry rents would become unaffordable amid deep cuts to housing programs and the drafting of the Tax Reform Act, which eliminated several tax shelters for real estate.

McClure, an economist for the city of Boston at the time, helped design a tax credit meant to reward affordable housing production. He described it as a three-year stopgap until policymakers found something better.

“It was meant to be a three-year stopgap until we came up with something better,” he said.

The original idea was to incorporate low-income housing into market-rate construction that was already underway. Developers could receive a tax credit if they capped rents for a portion of apartments in their building, while renting the remainder at any amount they chose.

McClure crafted letters for Boston’s mayor to send Congress in support of the plan. His analysis helped decide the subsidy amount: developers could offset 70% of the cost of new builds or 30% of the cost of a rehab. Congress signed off in 1986.

From the start, critics say the program diverged from the outcomes McClure expected. He and other drafters thought developers would offer deep discounts on a small number of units while charging market rates on the rest. Instead. developers found it more profitable to subsidize 100% of their units at the smallest allowable discount—a rent level affordable to households at 60% of median income.

When lawmakers considered making the 6-year-old Low-Income Housing Tax Credit permanent in 1992. an analysis by the Congressional Budget Office declared the program “unlikely to substantially increase the supply of affordable housing” and “more suited to the needs of investors than poor renters.” The CBO also pointed to administrative costs and said subsidized housing production could dampen market-rate construction. At the time, Congress was preparing to give developers $3 billion through the tax credit. The CBO concluded that putting that money into housing vouchers would help 550. 000 households—more than twice as many as would benefit from the construction tax credit.

Congress made the tax credit permanent a year later.

As years passed, McClure’s doubts hardened. When the Fannie Mae Foundation hired him in 1997 to analyze the program. he concluded it was a “very inefficient subsidy delivery mechanism” that didn’t produce as much housing as it should have. Other studies came to similar conclusions. including the finding that at least five studies reported the tax credit does little to increase overall housing supply.

The Government Accountability Office noted problems with the program in 2015. 2016. 2017. and 2018. finding it lacked basic oversight to show federal funds worked as intended. In 2017. an investigation by NPR and Frontline documented waste and fraud. including one developer pocketing tax credits without building the required housing.

In a 2017 article for the American Enterprise Institute. Edgar Olsen. professor emeritus of economics at the University of Virginia. wrote: “Given the available evidence on program performance. we should certainly not expand the tax credit program. ” adding. “The existing evidence argues for terminating it.”.

Critics within Congress have also pushed to end or weaken it. Rep. Glenn Grothman, a Republican from Wisconsin, introduced a bill to kill the program last year, calling it a “cash grab for developers and banks.” The bill went nowhere.

Olsen, like McClure, continues to press the issue. In a recent interview, he told OPB and ProPublica that he urged policymakers, in academic articles and testimony, to re-examine whether the program has any value at all.

“How often do they talk to people like me or like Kirk McClure? The answer is almost never,” Olsen said. “What they hear from are people who represent the financial interest of the industry, and so they want more money to be spent on this.”

The story in Portland—subsidized apartments built in large numbers. rents that converge toward market levels. and vacancies that still pile up—puts those arguments in sharp relief. Here, federal policy is not just a line item. It is an outcome seen at street level. in how long a unit sits empty and in who can finally afford to live behind a locked door.

United States politics Portland housing crisis Low-Income Housing Tax Credit LIHTC federal tax credits housing vouchers HUD Congress rent assistance Ron Wyden Maria Cantwell