Community Development Innovation Review

April 2013

Learning from the Low Income Housing Tax Credit: Building a New Social Investment Model


In this issue, Terri Ludwig notes the parallels between the Low Income Housing Tax Credit (LIHTC) and social impact bonds (SIBs). She rightly points to their public-private structure, market-based pricing, and built-in program accountability measures as evidence of commonality. Importantly, however, the forces that led to the creation of the LIHTC program were rooted in a different set of priorities than those currently undergirding SIBs. In fact, “social impact” was a secondary concern of the LIHTC; the primary concern was the subsidy of below-market real estate development through the tax code. As we consider using tools like the LIHTC more broadly, as Ludwig suggests, it is important to reflect on the thought process that led to its creation in the first place, and to take note of areas where investment tax credits could be successfully tuned to social impact outcomes. This article briefly examines the origins of the LIHTC, delves more deeply into the credit’s business model and social impact features, and offers some suggestions about how the credit could be refined to increase its social impact and equity even further.

Download the article (pdf, 177.93 kb)

Other articles in this issue

Community Reinvestment Act (CRA) Banks as Pioneer Investors in Pay for Success Financing

The Real Revolution of Pay for Success: Ending 40 Years of Stagnant Results for Communities

Pay for Success is Not a Panacea

The Promise of Pay for Success

Social Impact Bonds: Lessons Learned So Far

Pay for Success: Understanding the Risk Trade-offs

The Ethics of Pay for Success

Using Social Impact Bonds to Spur Innovation, Knowledge Building, and Accountability

Social Impact Bonds: Using Impact Investment to Expand Effective Social Programs

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Pay for Success: Opportunities and Risks for Nonprofits

Success Begins with a Feasibility Study

Government’s Role in Pay for Success

Rikers Island: The First Social Impact Bond in the United States

Human Capital Performance Bonds

Pay for Success: Building On 25 Years of Experience with the Low Income Housing Tax Credit

Can Pay for Success Reduce Asthma Emergencies and Reset a Broken Health Care System?

Supporting At-Risk Youth: A Provider’s Perspective on Pay for Success

Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation

Bringing Success to Scale: Pay for Success and Housing Homeless Individuals in Massachusetts

Making Performance-Based Contracting Work for Kids and Families