Hastings Law Journal


As governmental actors continue to withdraw from providing social services, private nonprofit and for-profit entities have stepped in to fill the gap and perform social service functions previously under the purview of governmental agencies. In doing so, nonprofit and for-profit actors vie for limited governmental incentives offered to encourage the privatization of social services. The competition between nonprofit and for-profit entities over privatization resources may adversely affect the beneficiaries of these social services. This Article highlights this competitive dynamic and the potentially negative consequences for social policy beneficiaries through an analysis of the federal Low- Income Housing Tax Credit (LIHTC) program. The LIHTC illustrates the government's steady shift away from directly constructing and managing low-income rental housing. The program subsidizes both for-profit and nonprofit real estate developers who succeed in a competitive application process for tax credits to construct or rehabilitate housing for poor tenants. This Article maintains that competition for tax credits is stilted in favor of politically powerful for-profit developers. It points out that forprofit developers are harnessing their political influence to eradicate legislative provisions related to nonprofit participation in tax credit housing. However, empirical data suggest that nonprofit tax credit housing is different from for-profit tax credit housing in ways that benefit tenants. This analysis cautions that if nonprofit/ for-profit competition is not legislatively regulated, forprofit developers could shape the program to minimize nonprofit participation in tax credit housing, and the resulting loss of nonprofit contributions would adversely impact tax credit tenants. While competition among developers for tax credits may not parallel nonprofit/for-profit competition for other privatization incentives, policy makers ought to pay attention to the effects that similar tensions might have on the beneficiaries of other social programs outsourced to private actors.

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