Tax-credit bills to benefit affordable housing
President Donald Trump’s pledge to overhaul the federal tax code has worried low-income housing advocates, but a final tax-reform package negotiated by Congress could ultimately boost the incentives available to provide affordable apartment units for the poor.
Bipartisan bills were introduced this month in U.S. House of Representatives and Senate that would expand the Low-Income Housing Tax Credit (LIHTC) program that has provided the fuel for most low-income housing developments in recent decades.
The Affordable Housing Credit Improvement Act of 2017, which failed to advance in 2016 during the last year of the Obama Administration, could gain some traction once the debate begins on tax reform, advocates say.
“There is a good chance that the provisions in [the House bill] will be enacted as part of comprehensive tax reform, which is the top priority for Congress and the White House,” said Sarah Mickelson, the director of public policy for the National Low Income Housing Coalition.
“There is bipartisan support for the Low Income Housing Tax Credit in the House and Senate, and bipartisan support for both bills,” Mickelson told Scotsman Guide News.
The LIHTC program offers dollar-for-dollar tax credits for affordable housing investments. The credits are allocated to state agencies that award them on a competitive basis.
The program was created in 1986 during the Reagan Administration as a way to draw private investment to build or rehabilitate affordable-housing developments that wouldn’t otherwise be profitable without a tax credit.
LIHTC credits were used to support 1,420 projects and 107,000 units annually on average between 1995 and 2014, according to the U.S. Department of Housing and Urban Development.
Commenting only on the Senate version, the National Multifamily Housing Council said the prognosis for the bill’s ultimate passage was “uncertain,” but noted that it has strong support from senior tax writers and could form part of the debate over tax reform.
Matthew Berger, the National Multifamily Housing Council's vice president of Tax, noted the bills have gained support from powerful members of both parties. He said that changes to the tax code, such as reducing corporate taxes, could adversely affect the program's ability to attract liquidity, and would require adjustments.
Berger was optimistic that the debate over the credits would be centered around maintaining or enhancing the existing levels of the credits, rather than cutting or eliminating the program.
"Until something is in writing, it is really hard to know, but I think there is a growing awareness that the credit is pretty much the nation’s only driver of building affordable housing units in this country," Berger told Scotsman Guide News. "There is clearly bipartisan support to keep it. It is our job to make sure that it is not harmed inadvertently and, if possible, we would like to see a bunch of enhancements."
Senate vs. House bills
There is a key difference between the House bill sponsored by U.S. Reps. Pat Tiberi, R-Ohio, and Richard Neal, D-Massachusetts, and the companion Senate bill.
The Senate bill, sponsored by U.S. Sens. Maria Cantwell, D-Washington, and Orrin Hatch, R-Utah, greatly expands the reach the program. It proposes to increase the per capita tax-credit allocation to the states to $3.53 per capita from the current $2.35 per capita.
The Senate bill also would boost the state minimum allocations to $4.065 million, up from $2.71 million. The changes would be phased in over five years, at a total cost of $4.1 billion over the next 10 years, according to the Joint Committee on Taxation.
“The House bill does not include this,” Mickelson said. It makes other changes designed to give states more flexibility in allocating the credits and in attracting more equity investment.
This story was updated from the original version to include remarks from the National Multifamily Housing Council.