Statement by National Low Income Housing Coalition President and CEO Diane Yentel—The Price of Tax Reform Must Not Be More Housing Poverty

WASHINGTON, DC — (RealEstateRama) — Comprehensive tax reform offers a once-in-a-generation opportunity to address one of the biggest barriers to economic success for families struggling to get by: the lack of decent, accessible and affordable homes for the lowest income people. Nationally, there are just 35 homes affordable and available to every 100 of the lowest income families. Due to chronic underfunding of critical affordable housing programs, just one in four low income households in need receives any assistance. The rest either live on the cusp of homelessness – most paying more than half of their income on rent – or they are one of the hundreds of thousands of people who have no homes at all.

Instead of seizing the opportunity tax reform presents to rebalance federal housing policy to end homelessness and housing poverty once and for all, House Republicans are working quickly to advance a tax bill that would: increase the severity of the affordable housing crisis by eliminating a critical resource for affordable housing development and preservation; siphon off savings from needed reforms to the mortgage interest deduction to pay for bigger tax breaks for corporations and wealthy households; and significantly increase the likelihood of severe cuts to the entire social safety net in the years ahead.

This bill, taken altogether, is irresponsible and unacceptable.

Increasing the Severity of the Affordable Housing Crisis

While the House Republican tax bill preserves the 9% Low Income Housing Tax Credit program (Housing Credit), it eliminates private activity bonds and the 4% credit, and fails to include any reforms to the Housing Credit to incentivize deeper targeting to make units affordable to the lowest income families.

The House Republican tax bill would repeal the tax-exempt status of private activity bonds, which are used to finance the construction and rehabilitation of multifamily housing for low income renters. Because the 4% Housing Credit is only available with debt financing from tax-exempt private activity bonds, the Republican bill essentially eliminates the 4% Housing Credit. This will have a severe impact on the construction and preservation of affordable homes throughout the country. Private activity bonds, and with them the 4% credit, are estimated to contribute to upwards of 60% of affordable homes built or preserved each year.

All told, the elimination of private activity bonds would mean the loss (not constructed or rehabilitated) of over 80,000 affordable homes each year. In addition, affordable multifamily housing rehabilitation or development for low-income communities in storm-ravaged Puerto Rico, U.S. Virgin Islands, Florida, and Texas will be stalled without access to private activity bonds.

Siphoning Housing Funding to Pay for Tax Cuts for the Wealthy

House Republicans should be commended for taking on powerful Homebuilder and Realtor lobbyists and PACs to directly reform the mortgage interest deduction (MID), a highly regressive $70 billion annual tax expenditure that primarily benefits higher income households. The Republican bill would reasonably lower the amount of a mortgage on which the MID could be claimed from $1 million to $500,000 for new homes and eliminate the availability of the deduction for second homes. These changes to the MID would impact fewer than 6% of mortgages throughout the country and would save an estimated $95.5 billion over the first decade.

This is a good and historic first step. Unfortunately, instead of using the savings from MID reform to better target spending on rental housing solutions for those with the greatest needs, House Republicans funnel these and other savings to pay for highly regressive tax cuts for the richest households and corporations including: eliminating the estate tax and delivering a tax cut windfall to the heirs of the wealthiest 0.2% of estates in the country; repealing the alternative minimum tax, providing tens of billions of dollars in tax breaks to the highest income people; and lowering corporate tax breaks at a cost of $1.5 trillion over 10 years.

This use of savings from reforming housing policy to pay for tax cuts for wealthy individuals and corporations is unacceptable. Instead, Congress should reinvest the savings from MID reform into affordable housing solutions for the lowest income people like the national Housing Trust Fund and a renter’s credit.

Increasing the Likelihood of Severe Cuts to Social Safety Net

The House Republican tax bill would increase the deficit by at least $1.5 trillion over a decade, a move likely to lead to deep spending cuts to critical social safety net programs including those for affordable housing and community development. The congressional budget resolution that started the process for these tax cuts calls for $5.8 trillion in budget cuts over the next decade, including $800 billion of cuts from the non-defense discretionary side of the budget. Republicans may use future legislation and spending bills to make such budget cuts, using projected increased deficits to justify doing so.

Time to Act

Congress should work on a bipartisan tax reform bill that:

  • Seizes a once-in-a-generation opportunity to rebalance federal housing policy by reforming the mortgage interest deduction and reinvesting the savings into proven solutions to end homelessness and housing poverty like the national Housing Trust Fund and a renter’s tax credit.
  • Preserves 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 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 leave out low-income families while giving tax breaks to the wealthiest households and corporations.

Solutions to the affordable housing crisis are urgently needed and within our reach. Congress can and must do better to achieve these solutions in comprehensive tax reform.

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PRESS CONTACT
Renee Willis
Vice President for Field & Communications
(202) 662-1530 x247

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NLIHC

The National Low Income Housing Coalition (NLIHC) is dedicated solely to achieving socially just public policy that assures people with the lowest incomes in the United States have affordable and decent homes.

The National Low Income Housing Coalition is dedicated solely to achieving socially just public policy that assures people with the lowest incomes in the United States have affordable and decent homes.

Contact:

Tel: 202/662-1530
Fax:  202/393-1973

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