Welcome -- Tax Reform
Welcome to my blog! I'm planning to post weekly with my comments to issues facing affordable housing and community development across the country, with maybe a bit more attention to Connecticut, my home state.
Up this week is tax reform. The House bill H.R. 1, the Tax Cuts and Jobs Act, would eliminate the tax exemption for private-activity bonds, which would also eliminate the use of 4% Low-Income Housing Tax Credits (LIHTCs). This is because the 4% LIHTC is paired with tax-exempt bonds. These funds can provide upfront LIHTC equity of about 30% of a development's costs and are commonly used to fund new construction of affordable housing when paired with state or local funds or to preserve and rehabilitate existing affordable housing.
Novogradac and NAHB provided a great summary of the impacts this change and others within H.R. 1 would have on the affordable housing industry: See How Many Jobs, Affordable Rental Homes Each State Would Lose under the House Tax Reform Bill. They estimate that over 980,000 low-income homes nationwide would not be built or renovated over the next 10 years due to H.R. 1!
The limited information we have on the Senate's corresponding tax reform bill indicates that the Senate intends to preserve the private-activity tax-exempt bond and the 4% LIHTC. This is good news for working-class and middle-class Americans and for the affordable housing industry, but I expect we are still far from the final text of the tax bill that Congress enacts, if any.
Rather than dwell on the national picture it is important to tell local stories about what tax-exempt bonds and 4% LIHTCs do for our towns and neighborhoods. The Millport developments in New Canaan, CT are a great example. New Canaan had a median home sales price of $1,350,000 from May to August, 2017 and a median rental rate of $6.500 per month over the same period. New Canaan is a highly desirable place to live, with great schools, a lively downtown, beautiful parks and recreation, and easy access to thousands of jobs by train to Stamford and New York City or by car to Stamford and Norwalk. But very few working-class or middle-class families can find an affordable home in New Canaan. The Housing Authority of the Town of New Canaan's (HANC) utilized tax-exempt bond financing and 4% LIHTCs to build the Millport developments, which provide a total of 113 apartments affordable to families earning between approximately $35,000 and $75,000 per year in an area where the median household income is $142,800. Without these funds the developments would not have happened.
Across the country there are thousands of stories like this that need to be told to remind politicians and everyday Americans why these programs are important and shouldn't be eliminated.