Senate Tax Reform Protects Critical Affordable Housing Resources

Tax Reform Fails in Other Critical Areas Including Improving Housing Credit and Reinvesting MID in Affordable Housing

On November 8, 2017, the Senate unveiled its tax reform proposal that initially only protected affordable housing resources from the Low-Income Housing Tax Credit and by maintaining the tax exemption for private activity bonds (PAB.)

This exemption was eliminated in the House tax bill. PABs are required for the 4% Low Income Housing Credit (Housing Credit.) The Housing Credit finances the construction and rehabilitation of tens of thousands of affordable homes each year.

The Senate bill also does not eliminate the New Markets Tax Credit program as the House bill would.

Both the Senate and House tax proposals fail, however, to improve the Housing Credit or to pursue one of the best and most immediate ways provide to more affordable rental homes for people with the lowest incomes through reinvesting savings from mortgage interest deduction reforms.

However, last night Senate Finance Committee Chairman Orrin Hatch (R-UT) released a “modified chairman’s mark” – an updated version of the Senate’s tax reform legislation from which the Committee will now work – that includes several changes relevant to the Housing Credit.

The new version of the bill still retains the Low-Income Housing Tax Credit (Housing Credit) and private activity bonds, including multifamily Housing Bonds. It also adds several no-cost proposals to strengthen the Housing Credit, taken from the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), which would:

  • Allow for a reasonable restoration period after a casualty loss (Sec. 302)
  • Replace the existing nonprofit right of first refusal with a purchase option to help nonprofit sponsors keep properties affordable for the long term (Sec. 303)
  • Clarify that state Housing Credit agencies have the authority to determine what constitutes community revitalization, with broad parameters, for purposes of determining whether properties are eligible for a basis boost by virtue of being located in a Qualified Census Tract and contributing to concerted community revitalization plan” (Sec. 307)
  • Prohibit local approval and contribution requirements in order to prevent NIMBY opposition from interfering with Housing Credit development (Sec. 308)
  • Require that states add a selection criterion to their Qualified Allocation Plans for housing that serves the needs of Native Americans (Sec. 401)
  • Rename the Low-Income Housing Tax Credit to the “Affordable Housing Tax Credit” (Sec. 501)

Click here for a bill summary for more information about these provisions.

Because many of the other broadly-supported provisions in the Affordable Housing Credit Improvement Act would cost money (though in many cases minimally), they were not included in the modified mark due to budgetary pressures.

The bill does not, however, provide any changes to the Housing Credit to preserve its production potential in a 20 percent corporate tax rate environment. According to Novogradac & Co., absent any change to the Housing Credit, the lower corporate rate would translate into a loss of roughly 300,000 affordable rental homes over the next ten years.

Advocates across the country responded to the call to action and supported affordable, supportive housing. Supportive housing continues to play an important role in the effort to address the needs of those struggling through homelessness, re-entering our communities from institutions or leaving hospitals. Congress is listening and responding through better Tax Reform proposals.

Committee hearings, floor votes and a difficult reconciliation process between House and Senate versions will unfold in the coming weeks.

House leaders are saying they intend to vote on their tax bill this week.

Senate leadership is indicating they will post their version of the Tax Reform bill for debate in the full chamber after Thanksgiving.

The ultimate goals of Congressional leaders are to reconcile differences between the two bills (House and Senate), and then send final legislation to the President’s desk by the end of December 2017.

The National Low Income Housing Coalition (NLIHC) recommends that instead of pursuing the current tax proposals, Congress should work on bipartisan legislation that:

  • Seizes a once-in-a-generation opportunity to rebalance federal housing policy by reforming the mortgage interest deduction and reinvesting the savings into solutions to end homelessness and housing poverty, like the national Housing Trust Fund and a renter’s tax credit.
  • Preserves and expands the Low-Income Housing Tax Credit program and includes bipartisan reforms designed to strengthen the program to better serve our nation’s lowest income households.
  • Preserves the tax exemption for private activity bonds that support the construction and preservation of affordable housing throughout the country.
  • Avoids increased deficits and, with them, future spending cuts to critical affordable housing and other social safety net programs.
  • Does not ignore the basic needs, including housing needs, of low income families to give massive tax breaks to the wealthiest households and corporations.

Senate Tax Reform Bill

NLIHC Analysis of Senate Bill

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