21-05-2025
Federal affordable housing incentive faces a Des Moines pause
The City of Des Moines should pause new projects that utilize the low-income housing tax credit (LIHTC) until suburban communities contribute a larger share of the metro's affordable housing, according to new recommendations from an out-of-state consultant.
Why it matters: The LIHTC is one of the country's most common tools for creating affordable housing, giving local and state governments billions of dollars in annual budget authority.
Advocates say LIHTC-funded projects drive development, while critics contend the program creates an unequal distribution of poverty in some areas.
Catch up quick: The LIHTC program, administered by the IRS and state agencies, provides tax credits to developers in exchange for maintaining affordable housing, usually for 10 to 15 years.
Projects typically require approval from local governments before they are awarded incentives.
By the numbers: As of January, DSM had 90 projects using the LIHTC to provide more affordable rents for low-income families, according to a report by the Iowa Economic Development & Finance Authority.
West Des Moines had eight, Johnston had four, Ankeny had three, and Urbandale had one.
State of play: DSM is developing its first comprehensive citywide housing strategy, which will shape the allocations of the LIHTC and other incentives for future projects.
Charles Buki, president of Maine-based urban planning firm CZB, recommended the LIHTC pause, saying that developers can exploit the system in deals that don't always benefit the city in boosting its tax base as much as other types of projects.
He recommends the city boost allocations to Invest DSM and Improving Our Neighborhoods (ION).
The big picture: The debate over the usefulness of the LIHTC continues, with groups like the Cato Institute testifying before a congressional oversight subcommittee this month that it is an inefficient solution to housing affordability.
What they're saying: Councilperson Josh Mandelbaum said a pause on using the LIHTC "abdicates Des Moines' responsibility to provide affordable housing" and would have prevented recent projects like Star Lofts along Ingersoll.
Councilperson Joe Gatto, however, said residents in his south-side ward are becoming weary of having LIHTC projects in their backyards.
"I bet if there was a project that came forward south of Grand, your neighbors might feel a little bit different," Gatto told Mandelbaum during last week's meeting.
Zoom in: Matt Hauge, spokesperson for the Polk County Housing Trust Fund, tells Axios that the LIHTC plays a vital role in revitalizing neighborhoods and supporting economic development and that a blanket cessation of its use in DSM "is just a bad idea."
Developer and former state Sen. Jack Hatch tells Axios that the proposal to pause the LIHTC is "misinformed" and rooted in a "lack of knowledge of housing finance."
