Protect Affordable Housing in Tax Reform
The following is an editorial by Armstrong Williams.
There is a lot to like in the tax reform bill winding its way through the House: pro-growth business incentives, simplification, and an international tax regime which encourages businesses to build factories and keep good jobs here in the United States. Unfortunately, House Republicans also may be on the verge of making a tragic decision impacting private investment in affordable housing that may negate all of this good work.
First the good news on housing: As Republicans in Congress look in every corner of the tax code for ways to cut taxes, they wisely have embraced the need to protect a vital national interest: encouraging public-private partnerships to build and preserve affordable rental homes through the Low-Income Housing Tax Credit.
The House tax reform bill in principle tracks the same priorities as in the “Big Six” tax framework, released in September. That blueprint identifies a mere two existing business tax credits for preservation: the Research and Development Tax Credit and the Low Income Housing Tax Credit, a huge message from Republicans who care about empowerment and opportunity. The unified framework stressed that these were worthy of protection as “tax incentives (that) have proven to be effective in promoting policy goals important in the American economy.”
House Ways and Means Chairman Kevin Brady’s explained that his bill retains the Housing Credit so that “families, individuals, and seniors can find a safe and comfortable place to call home.”
Great. Republicans inherently acknowledge the fact that there are only 12 counties in the nation where someone working full time in a minimum wage job can afford a modest one bedroom apartment. Unsurprisingly, there no areas of our great nation where someone working in a similar job could afford a two bedroom apartment for their family. This, in the ninth year of economic expansion and with unemployment at a historic low. And only one out of four poor families who are eligible for housing assistance, actually receive it.
As a matter of public policy, affordable housing is an area where we need the government to intervene to address a market lapse – it simply costs too much to develop homes at rents that low-income working families, seniors and veterans can afford. And achieving this goal through public-private partnerships, as is the case with the Housing Credit, is the most effective and efficient use of the government’s resources, with the additional benefit of creating roughly 100,000 jobs each year. So, it’s wonderful that conservatives have found a way to deliver this crucial assistance by accessing private capital, eliminating federal bureaucracy and embracing a federalist delivery model.
But hold the applause. Comb through the House tax reform bill and you will discover other provisions that would cripple affordable housing. Over half of the affordable apartments that are built each year rely on financing from multifamily Housing Bonds, which are a type of private activity bond. Perversely, the House tax bill – while retaining the Housing Credit – calls for repealing private activity bonds entirely. That change alone would cut our affordable housing production in half – it would mean half as many families, individuals and seniors who could find a safe and comfortable place to call home. A hundreds of thousands fewer affordable apartments will be created.
This creates an environment where more Americans, including school age children, veterans and the elderly face eviction and homelessness. This doesn’t help the economy; it hurts it. Kids don’t become better students when they are plucked out of the classroom because they don’t have a stable home. Seniors aren’t more likely to stay out of expensive hospitals and nursing homes and veterans aren’t more likely to get and keep a job when they have no place to call home.
To compound the problem, reduction in the corporate tax rate will also reduce investment in affordable housing unless adjustments are made to sustain it, since there would be fewer tax benefits for corporations who invest in affordable housing. This means that the government would still put forward the same amount of credits but leverage fewer private dollars.
According to a recent study by accounting firm Novogradac, these two changes – eliminating Housing Bonds and lowering the corporate tax rate without any offsetting adjustments – will cause us to lose out on nearly one million affordable apartments that would have been built. This impact is indefensible at a time when our nation’s rental housing is becoming increasingly unaffordable, and we can’t afford this setback. Lower income taxes aren’t going to be sufficient to keep a low skill worker in her apartment.
There are currently 11 million low-income households – over a quarter of all renters - who spend more than half of their income in rent, and that number is expected to grow as it is. They don’t just live in blue coastal states. They live in states like Indiana, Texas and North Carolina too. There are ripple effects for families and the economy when families can’t afford their homes. Tax reform should be an opportunity to make these problems better – not worse.
I applaud the House Republicans for recognizing the importance of affordable housing, and I know they want our affordable housing system to work as much as I do. We can’t let affordable housing be collateral damage in tax reform, and it’s not too late to fix it. To truly retain the Low-Income Housing Tax Credit, Congress must make sure it remains as robust a tool as it is today.
Mr. Williams is Manager / Sole Owner of Howard Stirk Holdings I & II Broadcast Television Stations and the 2016 Multicultural Media Broadcast Owner of the year.
Watch our Right Side Forum every Saturday Live Newschannel 8 TV 28 in DC, 10:30 am - 11:00 am and repeats 6:30 pm est.
Follow me on Twitter @arightside
Visit me online at www.ArmstrongWilliams.com