by Jesse Coburn

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Four and a half years ago, a newly formed corporate entity purchased a low-income housing complex with 264 apartments in Phoenix. The property had received more than $4 million in federal tax credits and, in exchange, was supposed to remain affordable for decades.

The company then used a legal loophole that stripped the affordability protections from the apartments. The maneuver appears to have been lucrative for the company, which bought the property for under $20 million and flipped it two years later for $63 million. Today, advertised rents there have gone up by around 50%.

Similar stories have been playing out across the country for years, as developers and real estate investors take advantage of an obscure section of the tax code known as the “qualified contract” provision. It allows owners of low-income rental properties that have received generous tax credits to raise rents far sooner than the law typically requires.

Some 115,000 apartments in the United States have lost rent restrictions as a result, according to one estimate. Experts say these conversions are exacerbating the nation’s shortage of affordable housing, which has intensified in recent years. One report recently concluded that the country has nearly 5 million fewer housing units than it needs. The problem is most acute for those with low incomes.

The loophole has remained open for decades despite widespread agreement among regulators and advocates about its harm. Congressional efforts to repeal the provision have failed — most recently in 2023 — though state reforms have trimmed its effects. President Donald Trump has........

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