Vanderbilt Law Review


Myron Orfield

First Page



A growing national debate about the future of race, housing, and urban policy in the United States is reflected in the recent controversy over the administration of the Low-Income Housing Tax Credit ("LIHTC") program, the largest federal program that supports building low-income housing. Administered by the Treasury Department, the program allows investors in residential rental property to claim tax credits for the development or rehabilitation of property to be rented to low-income tenants. The program is implemented mainly through state agencies which distribute the credit to developers on a competitive basis. Part of the LIHTC statute, which passed without debate as a later amendment, gives preference in allotting credits to very poor areas. Consistent with a common interpretation of this preference, many state agencies have allocated significant numbers of credits to areas with high concentrations of minorities and people with low incomes.

The concentration of low-income housing in already racially segregated neighborhoods, however, arguably violates the Federal Fair Housing Act of 1968 ("FHA"). The FHA responded to the government agencies' tendency to impede integration by building low- income housing in poor, segregated neighborhoods. The legislative debate and the judicial and regulatory interpretation of the duty to affirmatively further fair housing reflect the understanding that such building patterns fostered racial and social segregation. The Act ordered the federal government and all agencies and grantees involved in federally funded housing to "affirmatively further" fair housing. Courts and agency regulations interpreted this duty to require the federal government to use its programmatic leverage to support racial integration and to prohibit, with narrowly defined exceptions, the federal government and its grantees from developing low-income housing projects in areas where minority and low-income residents were concentrated.

Reconciliation of the tax credit's preference and fair housing duties has received some attention among housing activists and scholars." The government agencies responsible for fair housing and for administering the programs, however, have not provided specific regulatory guidance. In 2003, a broad pre-litigation letter was sent by eleven state and national fair housing groups to the IRS administrator of the LIHTC program, and meetings related to this issue are beginning within the agencies. Lawsuits have been filed in New Jersey and Connecticut and are being considered in Massachusetts.