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 that encourages businesses to build factories and keep good jobs here in the United States. Unfortunately, House Republicans also might be on the verge of making a tragic decision affecting private investment in affordable housing that could 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 has 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 are no areas of our great nation where someone working in a similar job could afford a two-bedroom apartment for a family, in the ninth year of economic expansion and with unemployment at a historic low. And only one in 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. More than 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 only half as many families, individuals and seniors could find a safe and comfortable place to call home. And hundreds of thousands fewer affordable apartments will be created.