No Summertime Blues for Affordable Housing: Capitol Connection from Bob Moss
An extremely positive hearing held August 1 by the Senate Finance Committee entitled “Increasing Access to Affordable Housing” reflects the steady work of housing advocates across the country and the recognition by Chairman Orrin Hatch of how effective the Low Income Housing Tax Credit (LIHTC) program is to solving the rental housing crisis in America. In his opening remarks regarding the crisis, Chairman Hatch stated:
“There seem to remain many households facing cost burdens associated with renting, with perhaps as much as 26% of renter households having paid more than half of their incomes in rent in 2015, for example. And the burdens seem to fall heavily on lower-income households.”
The witnesses were extremely engaged and represented a cross-section of experts, including NAHB President Granger McDonald, whose candor, knowledge, and experience in developing affordable housing utilizing the LIHTC were clearly evident in his remarks.
Since the November elections, affordable housing advocates have been on the edge of their seats wondering what the future would hold for programs like the LIHTC and Appropriated Federal Funds. Two major factors created anxiety within the industry; Tax Reform and the potential reduction of the corporate tax rate, and the proposed budget cuts by the Administration.
The threat of a lower corporate tax rate, immediately after the election, gave pause to investors who provide the equity capital needed to facilitate the creation and preservation of affordable properties in the LIHTC program. The uncertainty of future rates going down from 35% to a range of 15% to 25% left investors, many of them with memories of the 2008 Financial Crisis fresh in their minds, with the choice of maintaining pre-election equity pricing or lowering pricing to accommodate projected lower corporate rates, if tax reform occurred.
The President’s proposed budget cuts to the Department of Housing and Urban Development, introduced this past May, included not only the elimination of the $3 billion Community Development Block Grant (CDGB) program, but also zeroed out Choice Neighborhoods and the HOME Investment Partnerships Program. Congress, it seems, does not feel the same way. A few weeks ago, the House Appropriations Committee scaled back the CDBG slightly, from $3 billion to $2.9 billion, and did the same to HOME by cutting it from $950 million to $850 million. Grants for Homeless Assistance were funded at $2.4 billion, which is equal to the level provided in fiscal year 2017.
Even more recently the Senate Committee on Appropriations unanimously approved the fiscal year 2018 THUD Appropriations Act. It provides a total of $60.06 billion in discretionary budget authority, which is $2.41 billion more than in fiscal year 2017 and $12.130 billion more than the president’s budget request.
For today’s Senate Finance hearing, it was refreshing to see the LIHTC program, a program that the industry knows well, in full display before the Committee. Such a positive hearing should further our efforts to gain more co-sponsors for Senate bill S548 and House Bill H.R. 1661, the Affordable Housing Credit Improvement Act of 2017.
We must continue our efforts to expand the LIHTC and educate Congress as to the importance of the credit; the LIHTC is a tax expenditure that provides for an activity that otherwise would not occur in the marketplace. We know that affordable housing should be recognized as an infrastructure issue in America, please let your member of Congress know that as well.
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 email@example.com or 617-648-1406. For more legislative insight from Bob, visit our Capitol Connection webpage.
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