A New Argument to Support the Housing Credit

Let’s face it; the rental housing crisis is real and getting worse. With the release of the Joint Center for Housing Studies of Harvard University (JCHS) report on June 22, 2016, we have an updated, data-driven piece to use with Congress. The question is, are we too far into the sausage making of the election to get their attention? Perhaps this new data, and a new approach, will raise some heads on Capitol Hill, because the facts are alarming.

The report states that the overall housing market recovery has been largely driven by increased demand in the rental market, not through home ownership.  In fact, over one-third of U.S. households rented in 2015—the highest percentage since the Eisenhower administration. The demand for rental properties is only going to increase in the future, unless Congress acts.

Housing is also getting more expensive. JCHS found that rental rates rose by more than 3.6 percent in 2015, outpacing wage increases. Nearly 21.3 million renter households were cost-burdened (paying 30 percent or more of their income in rent) in 2014 - 3.6 million more households than in 2008. The number of severely cost-burdened households (paying 50 percent or more of their income in rent) is now at a record high 11.4 million. This represents a population that is nearly the size of Ohio’s, to put it in perspective, our 7th largest state.

There has been some action to try to tackle the problem. Senate bill S.2962, the Affordable Housing Credit Improvement Act of 2016, was introduced by Senator Maria Cantwell [WA] in May. It would provide permanent increases in state low-income housing tax credit (LIHTC) allocations by phasing in a 50% cap increase over 5 years, beginning January 1st 2017. The increase has been scored with a cost of $4.1 billion over 10 years.

This is a pretty heavy lift right now for a number of reasons. One is the election. Trying to get Senate Finance Republicans on board is proving to be a major obstacle because many of them are running in tight races. You would think that co-sponsoring a bill that increases affordable housing production would be a no-brainer, but the price tag with no offsets (after spending $600 billion last fall) has been a non-starter. Coupled with the fact that no tax bill is likely to be introduced this year, and you can see why we are having a tough time getting anyone’s attention. With our alliance with the ACTION Campaign and state partners, we are certainly trying.

Rep. Pat Tiberi [OH], our House LIHTC Champion who led the fight for a permanent 9% rate fix in last fall’s PATH Act, has asked us to educate the more conservative House members, which we have done and will continue to do. Getting a lawmaker to support the increase is pretty tough when their view is that all governmental programs should be eliminated, not to mention Federal Agencies like the IRS and HUD. That is not stopping us from meeting with them. But maybe we need to tailor a new message.

The LIHTC program has compiled compelling data on job creation, and the program is administered by very experienced state housing agencies. We use both of these tools with lawmakers but may be overlooking one very important argument in our favor. There are experts and specialists who look at infrastructure spending in the U.S. and they note that most of the spending is not driven by the government, but by the private sector. They have said that if Congress wants to boost infrastructure spending, the first priority is to encourage private investment. For those who don’t know it, that is exactly what the LIHTC does—it leverages private investment. Perhaps this is the message we should be using with Congress in order to help those who are forced to choose between paying rent or having food and medicine.

Bob Moss is a CohnReznick Principal and National Director of Governmental Affairs. Bob leads the Firm’s federal and state government relations efforts, particularly in the area of affordable housing. He can be reached at bob.moss@cohnreznick.com or 617-648-1406. For more legislative insight from Bob, visit our Capitol Connection webpage.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.