Supporters of affordable housing from around the country are pressing Senate tax writers to advance tax policy that they believe can play a major role in addressing the current housing crisis.
According to a new report from the National Association of Realtors, the share of sales going to first-time homebuyers fell last year to the lowest level on record.
“There can be little doubt we are currently in an affordable housing crisis,” Denise Scott, president of the Local Initiatives Support Corporation (LISC) told lawmakers during a March 7 Senate Finance Committee hearing on ‘Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.’ “Rents have been rapidly climbing, supply has been tightening, costs of construction have been increasing, and we have underproduced roughly 3.8 million homes.”
According to the National Association of Home Builders, since Spring 2020, prices have gone up for frame lumber by 25 percent, copper by 187 percent, aluminum by 72 percent, steel mill products by 79 percent, plastic construction products by 55 percent, brick by 25 percent, interior paint by 47 percent, and exterior paint by 62 percent.
Several committee members appeared on board with the need for legislative intervention. Senator Maria Cantwell, Democrat of Washington, and Senator Todd Young, Republican of Indiana have put forward the Affordable Housing Credit Improvement Act (S 1136), which would expand the Low-Income Housing Tax Credit (LIHTC) to create 2 million new units nationwide. On March 6, Young and Senator Ben Cardin, Democrat of Maryland, introduced the Neighborhood Homes Investment Act, which would provide more private investment for housing in blighted and struggling neighborhoods.
Ranking member of the Committee Mike Crapo, Republican of Idaho, also promoted the LIHTC tax credit while also suggesting that government red tape blunted the credit’s use. “Targeted tax policies such as LIHTC are an important part of solving housing affordability and supply issues, but we must also address the drivers that are raising the cost of housing generally,” said Crapo in his opening statement. “When input and regulatory costs are high, LIHTC is less effective.”
Senate Finance Committee Chairman Ron Wyden, Democrat of Oregon, used the occasion to announce that he had reintroduced the Decent, Affordable, Safe Housing for All (DASH) Act, which would address the housing affordability crisis by increasing supply, and expand homeownership opportunities by creating a new down payment tax credit for first-time homebuyers.
Scott had more recommendations for the Committee. She called for restoring the 12.5% increase to the formula for the 9% credit allocation, enact the Affordable Housing Credit Improvement Act (AHCIA), adopt policies to prevent the loss of existing affordable housing properties and resources, exempt from a state’s Private Activity Bond cap any bond authority used for the recapitalization and syndication of Housing Credit development, and make the New Markets Tax Credit (NMTC) Program permanent.
Executive Director of the Washington State Housing Finance Commission Steve Walker told Committee members the Housing Credit and Housing Bonds are by far Washington state’s Housing Finance Agency (HFA) most essential production tools. He added that “By far, the most impactful thing Congress could do to meet the need (for more affordable housing) is to pass Senator Cantwell and Senator Young’s Affordable Housing Credit Improvement Act (AHCIA). The AHCIA is comprehensive legislation that would expand and strengthen the Housing Credit,” he said.
Walker noted that DASH Act supports the Neighborhood Homes Investment Act (NHIA) and would establish a new tax credit, the Neighborhood Homes Credit, modeled after the highly successful Housing Credit. Dash would reform the tax code to strengthen the Low-Income Housing Tax Credit (LIHTC), as well as establish a Renter’s Tax Credit and Middle-Income Housing Tax Credit (MIHTC); “The housing crisis will not get better unless Congress acts,” he told lawmakers.
Sharon Wilson Géno spoke on Behalf of the National Multifamily Housing Council and National Apartment Association. “While it will take a variety of tax and non-tax approaches to increase supply, the rental housing industry believes tax policy can play a critical role in this regard,” she testified. She urged Congress to expand and enhance the Low-Income Housing Tax Credit, enact the Middle-Income Housing Tax Credit to support workforce housing, and to enhance Opportunity Zones to incentivize the rehabilitation and preservation of multifamily buildings.
Garrett Watson, a Senior Policy Analyst and Modeling Manager at the Washington, D.C. based Tax Foundation also told members that reforming the LIHTC and improving cost recovery for structures Is “vital” for expanding affordable housing. In addition to reforms to LIHTC, Watson said a supplementary approach to expanding the supply of affordable housing is to reduce the tax burden on investment in housing. “One way to reduce the tax burden is by improving the cost recovery of structures in the federal tax code,” he said.
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