According to HUD's annual analyses, many areas have experiencedno income growth for several years, so rents have not risen. Ofcourse, expenses such as insurance, real estate taxes, andespecially the portion of utility costs for each unit--which theproperty owner must give back to the renter as an allowance--haverisen sharply. Property owners cannot continue to absorb theserising costs indefinitely. And recent changes in HUD's methodologyused to compute area median income has made the situation even moreserious.

A recent study by the National Association of Home BuildersHousing Policy department found nearly 200 metropolitan areas andcounties across the country where flat income limits have frozenrents at tax credit properties every year since 2003. Over thattime period, utility costs nationwide have risen about 27%. In themost extreme cases, some areas may face flat income limits--andtherefore flat tax credit rents--for the next decade. The recentlypublished 2007 Income Limits illustrate the problem all too well;HUD's analysis shows that incomes have stagnated or fallen for 75%of the country while the underlying data show a 4% increase inincomes nationwide. The result constitutes a complete disconnectbetween the statistical methodology and the real world. In short,income is being held artificially flat and expenses are continuallyrising, which, as anyone in business surely knows, is a recipe fordisaster. This is jeopardizing the existing affordable housingstock, and could at the same time put the brakes on newdevelopment.

The members of NAHB's Housing Credit Group--the developers,owners, managers, and lenders who work with the LIHTC--are in aCatch-22 situation: The very income restrictions meant to ensurethat these properties are available to serve people in need ofaffordable housing are actually threatening the long-termsustainability of many of these projects. It's a very serious issuebecause affordable housing is already in short supply--and we can'tafford to lose more of it.