In late September, the Administration and Republican leaders in both the House and Senate released their Unified Framework for Fixing Our Broken Tax Code, a broad outline intended to serve as a template for the tax-writing committees to develop tax legislation. The plan explicitly proposes to retain the competitive 9% Low-Income Housing Tax Credit, which is terrific news because the Housing Credit is the nation’s most successful tool for encouraging private investment in the production and preservation of affordable rental housing. Housing Credits are responsible for nearly all the affordable housing built and preserved in recent decades.
We were dismayed, however, to see that the Trump administration and congressional leadership’s tax plan does not explicitly call for retaining tax exemption for private activity bonds, which are crucial for 40 percent of Housing Credit transactions. A substantial majority of 4% transactions involve the preservation of housing for extremely low-income households. NHT will continue working closely with the ACTION Campaign to educate Members of Congress and the Administration of the importance of tax exemption of private activity bonds.
Increased use of 4% Housing Credits
NHT has found that the dollar value of 4% Housing Credits allocated nationally has more than doubled since 2010.
Our findings, based on data from 2014, show that 4% Housing Credits and Private Activity Bonds are increasingly being used to finance the creation and preservation of affordable housing nationwide. Additionally, the 4% Credit is notably used for preservation in some conservative states.
In recent years, many states have begun to utilize 4% Credits increasingly for preservation deals, which tend to protect affordable housing for very low-income Americans. We will urge Congress to protect private activity bonds and the 4% Credit to ensure that these projects continue to be completed.
In 2010, a total of $148.5 million of 4% Credits were allocated nationally. Of this, 54 percent went to preservation. By 2014, this number had increased by 150%! $310 million worth of 4% Credits were allocated nationally. Of this, 62 percent went to preservation.
The following states are allocating a significant portion of their total 4% Credits to preservation:
- Illinois: allocated 81 percent (or $8.2 million)
- Kansas: allocated 100 percent (or $324,000)
- Kentucky: allocated 100 percent (or $784,000)
- Maryland: allocated 78 percent (or $6.7 million)
- Michigan: allocated 94 percent (or $5.6 million)
- Missouri: allocated 86 percent (or $1.8 million)
- New Mexico: allocated 100 percent (or $767,000)
- Ohio: allocated 92 percent (or $29.5 million)
- Virginia: allocated 75 percent (or $2.4 million)
- Wisconsin: allocated 100 percent (or $754,000)
The tax framework only outlines the priorities of congressional leadership and the White House. This initial proposal may be changed significantly as the tax writing committees in the House and Senate work out details. The Administration and congressional leaders hope to have tax reform signed into law by the end of the year.
Now is the time to weigh in with Members of Congress to emphasize the importance of protecting the tax exemption for private activity bonds and the critical role of 4% Credits in preserving irreplaceable affordable housing for very low-income Americans. We must not wait to make this case – next year may be too late.
For more information on the tax framework and how it impacts both affordable housing and preservation, contact NHT Federal Policy Director Ellen Lurie Hoffman.