The national low-income housing tax credit (LIHTC) portfolio continues to show strong occupancy, maintaining a median physical occupancy of 97% in 2024, according to a new report by CohnReznick.
Most properties remain well leased, with only a small fraction below 90% physical occupancy, typically due to isolated, property-specific factors.
While foreclosures remain very low, there’s an increase in the percentage of properties on a watch list. Watch-list representation reached a 10-year high of 16.9% last year, up from 14.2% in 2022, reports CohnReznick, a leading accounting and professional services company, in its “2025 Affordable Housing Credit Study.”
On a positive note, LIHTC investments remain exceptionally strong. The cumulative foreclosure rate is just under 0.5%, with no new foreclosures reported by the report’s data providers since 2021.
The review of 30,000 housing units also revealed:
- From 2023 to 2024, operating expenses grew by 10.3% annually among the watch-list properties, an even faster pace than the 6.9% annual growth rate reported among all stabilized properties and materially higher than the 3% industry standard assumption for annual operating expense inflation;
- On a national median basis, total 2024 operating expenses (not including replacement reserve contributions) across the surveyed portfolio were $7,748 per unit per annum (PUPA). Replacement reserve contributions typically range from $250 to $400 PUPA. Inclusive of a $300 per unit per annum in replacement reserve contributions would increase 2024 total operating expenses to $8,048 per unit on a national median basis; and
- After paying hard debt service and making required replacement reserve deposits, the median per unit cash flow was $937 per unit in 2024.
To complement the study, CohnReznick also released its newest dataset called the Affordable Housing Credit Tool. Users can access interactive data through an online interface providing the most recent data. Together, the Affordable Housing Credit Study and Credit Tool help the affordable housing community benchmark portfolios, develop best practices, and gain further insights into the industry.
Affordable Housing Finance discussed the latest findings with CohnReznick’s Cindy Fang, partner and tax credit investment services leader, and Beth Mullen, partner and affordable housing industry leader.
What’s your main takeaway from this year’s study?
Fang: Our 2025 Credit Study, which updated the LIHTC industry’s portfolio performance through year-end 2024, reaffirmed several enduring strengths of the program:
- With physical occupancy levels near full capacity, the findings highlight the urgent need to expand LIHTC programs to meet growing demand;
- The resilience of LIHTC properties as an asset class, coupled with the strong investment performance of LIHTC funds, points to long-term stability that continues to attract investors despite broader market challenges; and
- The industry’s cumulative foreclosure rate remains below 0.5%, underscoring the program’s effectiveness and sound management.
At the same time, portfolio performance has yet to fully recover to pre-pandemic levels. Macroeconomic headwinds—including elevated interest rates and inflationary pressures—pushed roughly one-quarter of stabilized properties below breakeven in 2024. Certain markets also faced ongoing rent collection and operating expense challenges, though these are being actively addressed through proven strategies and financial safeguards. In addition, up to 30% of properties in lease-up or pre-stabilization were placed on watch lists, often due to construction-related issues carried over from prior years.
Overall, LIHTC remains a resilient program, though persistent economic and operational challenges continue to weigh on performance.
What does this year’s report tell us about property income and expenses?
Fang: For years, industry standards of 2% income growth and 3% expense growth held true as reliable long-term benchmarks. However, the pandemic disrupted these trends, with operating expense spikes emerging as a key driver of property underperformance. Between 2023 and 2024, national operating expenses rose 7% across stabilized properties and over 10% among underperforming properties—both far exceeding the 3% baseline assumption. A similar trend was observed in the last several years.
While revenue growth frequently surpassed the 2% assumption, the expected 100-basis-point spread between income and expense growth has largely broken down in recent years. Compounding this, most LIHTC properties were not designed with substantial operating cushions, leaving them vulnerable. Sharp year-over-year expense increases can quickly push properties into financial distress.
How concerned are you about the rising percentage of properties on a watch list?
Fang: To set the stage, the “watch list” used in our report refers to the five-tier risk rating system established by the Affordable Housing Investors Council (AHIC). In 2024, properties on the watch list reached a new historical high of 17%—a development that warrants attention. Even so, consistent with prior years, only 2.5% of the national portfolio was assigned an AHIC “D” or “F” rating, indicating heightened or imminent foreclosure risk. Many of the watch-list properties received a “C” rating, which signals caution but are likely not in stress or workout.
We are closely monitoring the watch list trend. More important, we remain confident in the industry’s ability to collaborate on proactive asset management strategies—ranging from expense controls to rent collection improvements—to safeguard performance and stability.
What insights did you gain about rent collection losses?
Mullen: The 2025 Credit Study confirmed that rent collection losses remain a persistent challenge, particularly in certain markets, and continue to weigh on property performance despite the overall resilience of the LIHTC portfolio. In 2024, 22% of the national portfolio reported economic vacancy rates above 10%, with the majority of these losses stemming from collection issues rather than physical vacancies. Moreover, nearly half of all states saw at least 25% of their properties exceed the 10% economic vacancy threshold, underscoring the widespread nature of this pressure.
Several historically strong real estate markets, including Washington, D.C., and New York City, were significantly impacted by collection losses, driven largely by local eviction policies and enforcement protocols. These jurisdictions are now taking steps to try to restore the operating health of the housing in their communities.
Are you seeing any industry best practices that are proving to be especially helpful during challenging times?
Mullen: The affordable housing industry has long been defined by collaboration. This spirit of partnership has been central to the industry’s resilience—whether navigating economic downturns, addressing rent collection challenges, or expanding programs like the LIHTC to meet growing demand.
Knowledge sharing is a clear example of the industry’s collaborative spirit. We extend our gratitude to the data providers whose contributions made the credit study possible. Without their participation, this work could not exist. Their timely and consistent reporting has enabled the industry to better understand portfolio performance, establish benchmarks, and exchange best practices.
More specifically, we’ve seen careful underwriting practices that include stress-testing, the adoption of localized and collaborative rent collection strategies, and more proactive approaches to staffing and property management.
What trends will you be watching in 2026?
Mullen: The enactment of the One Big Beautiful Bill Act in July 2025 marks a pivotal and encouraging milestone for the industry with the largest expansion of the housing credit in a quarter century. While production won’t double overnight, there is no doubt that more developments will pencil out and more households will be served.
Another trend to watch is how technology is being leveraged to lower construction and operating costs. Owners are looking at artificial intelligence and data analytics to make many processes more efficient and user-friendly, though industry best practices are still a work in progress.