New housing under construction in St. Louis. The development is receiving federal low-income housing tax credits. Jeff Roberson/AP

The final tax bill that goes to the White House could have very little effect on housing affordability—or it could gut mechanisms for encouraging it.

Early on Saturday morning, the Senate passed a $1.5 trillion tax overhaul by a razor-thin margin. Draft pages of the tax bill were still being added to the legislation even as senators were debating taking the weekend to read the bill.

Looking at the Senate bill in the bright light of day, it’s hard to see any evidence that congressional Republicans see the tax code as a way to solve the housing affordability crisis. That’s one difference between the tax reform today and the last push in 1986, which used tax incentives to spur developers to build safe, affordable housing.

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Tax reform in 2017 doesn’t include any ideas for making homes more affordable. Instead, Congress can only make the problem worse by transferring wealth to the very wealthy and sharpening income inequality. Instead of designing brand new credits to draw even more investment (profitably!) to poorer communities, the GOP is writing a tax bill to kill or curb the programs that work and funnel investment in the other direction.

The House and Senate must still reconcile their versions of the tax reform bill, which vary widely on crucial points, including whether to repeal the individual mandate for healthcare and how far to slash the estate tax. Almost every provision in the tax bill that concerns housing is up for debate, and some amendments have far-reaching consequences for affordable housing.

The final tax bill that goes to the White House could have very little effect on housing affordability—or it could cut back the production of new affordable housing by as much as 1 million units over the next decade. Here is a list of the key differences to how the House and Senate versions of the bill that affect affordable housing.

Private-activity bonds: Already underused, a change could mean a loss of 880,000 affordable units

Bonds issued by cities or states on behalf of private and nonprofit developers serve as a tax-exempt means of financing capital for all sorts of projects, from ports to hospitals to affordable housing. The House repeal of tax exemption for private-activity bonds (PABs, or “conduit” bonds) led to a rush of activity in the $3.8 trillion municipal bonds market.

Repealing the tax exemption for private-activity bonds would land like an earthquake for all kinds of financing. As expected, the Senate balked at such an action, and its bill retains private-activity bonds. But the final law could change in conference, and the future of affordable housing is one thing that hangs in the balance: According to Novogradac and Company, a CPA and consulting firm, repealing private-activity bonds would result in 788,000 to 881,000 fewer affordable housing units built or retained over the next decade.

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This would be a shame, especially since developers could be building much more affordable housing using private-activity bonds. According to the Council on Development Finances Agencies, states are not meeting their volume cap for qualified private-activity bonds (although things have improved a lot since 2008). While much of the unused allocation carries forward year to year, it eventually expires. The report states: “In 2017, states again have at their disposal record amounts of private activity issuing capacity.”

The best engine for new affordable housing—Low Income Housing Tax Credits—could be undermined by tax reform

The very possibility of a tax bill has already changed the market for the most effective tax incentive for building new affordable housing in the U.S.: Low Income Housing Tax Credits, or LIHTCs.

While private-activity bonds serve to finance all sorts of qualified projects, housing credits are specific tools for developers of affordable housing. (Bonds for multifamily housing projects come with housing tax credits automatically.) Banks buy the credits in order to claim benefits that pay out over 10 years. Tax reform shifts the appeal of LIHTCs. While the tax bill does not repeal housing tax credits, it could undermine them.

A dramatic reduction of the corporate tax rate might diminish the appeal of tax credits to investors, which in turn could make new affordable housing developments harder to finance. Tax credits are worth less in an environment where would-be investors pay much, much less in taxes.

As for LIHTCs specifically, the House and Senate versions treat these credits different ways. Some housing tax credits go hand in hand with private-activity bonds, so these credits would go away with the House bill but be retained by the Senate version. Also at issue are some wonky tax details that affect how housing tax credits are allocated and calculated—whether the consumer price index for all urban consumers (CPI-U) or “chained CPI” is used to adjust for inflation. These decisions could result in thousands fewer affordable housing units built each year.

The Senate bill offers a couple of trade-offs. An amendment filed by Kansas Republican Senator Pat Roberts would enable states to give preferential treatment to veterans and designate rural areas as difficult to develop areas for a basis boost of the LIHTC subsidy. However, Roberts proposes limiting the value of the basis boost. This might expand the value of housing tax credits in certain areas, but it also might make it harder to build the deals that result in affordable-housing developments.

The bill could kill or weaken the incentive to save historic buildings

Preservationists fought to preserve the 20 percent tax credit for developers who save historic buildings, arguing that without the incentive, developers would not bother. The House ignored those calls. The Senate version retains the Housing Tax Credit but changes it so that the value must be claimed over a period of five years.

Changes that make it less inviting for developers to take the often-costly and difficult steps to preserve, restore, and rehabilitate older builders means that they may be less inclined to do so when the option of knocking down a building is available. That makes it harder to save historic buildings when there’s a plan to reuse the building, and harder to come up with a plan when there isn’t one.

The mortgage-interest deduction may get cut, but the savings will only trickle up

Eliminating the mortgage-interest deduction and using the savings to pay for new affordable housing was the progressive pipe dream for tax reform among affordable housing advocates. A coalition of 2,300 advocates and organizations called United for Homes called on Congress to end the deduction and redirect that money toward programs such as the National Housing Trust Fund.

Progressives only partly get their wish with the mortgage interest deduction—if even that. The House version of the bill reduces the deduction to interest on up to $500,000 of a home loan, meaning that people with more valuable homes will pay higher taxes. However, there is no mechanism for transferring the value saved with this policy to the country’s most vulnerable families. Instead, much of the tax value will simply accrue to the country’s wealthiest households.

The status quo could still prevail: The Senate bill features no substantial changes to the mortgage interest deduction. That might be preferable to a reform that only intensifies the inequality of the mortgage-interest deduction by transferring the money to ultra-elite households.

But in many ways the status quo cannot last. The bill’s implications for the deficit (which Republicans are ignoring) are predicated on permanent growth. That’s not how the economy works. Eventually, the economy will face a downturn. Many parts of the country are still reeling from the foreclosure crisis. When it comes to the housing affordability crisis, the status quo is already a disaster—but the GOP-led tax reform bill shows that it could get even worse.

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