SEATTLE, Dec 23 (Thomson Reuters Foundation) - The new U.S. tax bill could have a negative impact on the production of affordable housing at a critical time of rising demand across the country, according to low-income housing advocates.
The U.S. Congress passed the Tax Cuts and Jobs Act of 2017 and President Donald Trump signed the bill on Dec. 22, keeping a promise to deliver a tax cut by Christmas. But the 503-page bill, which critics say was rushed through Congress for speedy passage, could leave some collateral damage in its wake when it comes to affordable housing programmes, according to the National Low Income Housing Coalition.
“This bill will exacerbate our country’s already yawning income inequality and will harm efforts to end homelessness and housing poverty,” coalition President and CEO Diane Yentel said. Housing advocates’ main concern is how the reduction in the corporate tax rate impacts the market for Low Income Housing Tax Credits, the fiscal mechanism responsible for the largest share of privately-built affordable housing in the United States.
U.S. corporations purchase these credits, which reduce their tax bill, by investing in affordable housing developments.
A lower corporate tax rate means private companies will have less incentive to invest in the production of affordable housing.
Analysis by public accounting and consulting firm Novogradac & Co said this change would reduce the future supply of affordable rental housing by nearly 235,000 homes over 10 years.
“At a time when we should be increasing investments in solutions to the housing crisis impacting low income people across the country, the increased deficits created by these tax cuts puts the national Housing Trust Fund and other vital housing and community development programs at risk of deep spending cuts down the line,” Yentel said.
The repercussions of changes to that market will be felt nationally where there is a shortage of 7.4 million affordable homes for renters living at or near the poverty line, according to a National Low Income Housing Coalition report.
In Seattle, where increases in home prices led the nation for the 13th straight month in November, local officials are bracing for the impact. “We think lowering the corporate tax rate from 35 to 21 percent without making other changes to the Housing Credit will mean a 14 percent reduction in the number of affordable homes we are able to create in Seattle,” said Steve Walker, director of the Seattle Office of Housing.
“In 2017, this would mean an impact of approximately 125 less affordable homes being built, or at least one building, at a time when we face an affordability crisis.”
Trump touted the corporate tax rate reduction as a boost to the U.S. economy, saying it would mean more products were made in the United States and bring back companies.
Low-income housing advocates said the final tax bill was an improvement on earlier versions, however, which would have entirely eliminated Low-Income Housing Tax Credits and another affordable housing tool, tax-exempt Private Activity Bonds.
Yentel said such a course of action would have had “an immediate devastating impact on affordable housing.” (Reporting by Gregory Scruggs, Editing by Belinda Goldsmith )