Funding low-cost housing 


WASHINGTON – Feb. 10, 2009 – Can the U.S. afford its workforce housing programs? And if so, how should they be funded? Different bills are under consideration on Capitol Hill as part of the economic stimulus. Each has the same goal, but they use different tactics.
 
The Senate version would allow companies to use affordable-housing credits to shelter profits from the last five years, temporarily expanding the current law that allows this accounting treatment for a single year only. An amendment introduced by Sen. Maria Cantwell (D-Wash.) would permit buyers to use most of the credits over three years instead of 10, though the change would be temporary.

Meanwhile, under the recently-passed House bill, state agencies that administer low-income housing tax credits would receive federal funding. 

The financial crisis has made it difficult for some low-income housing developers to sell their tax credits, forcing them to delay projects. However, observers say tax credits should attract more buyers these days, as they are going for as little as 75 cents on the dollar in certain markets. Michael Novogradac of Novogradac & Co. says the number of affordable-housing tax credits purchased by investors fell to between $4 billion and $5 billion last year from upwards of $8 billion in 2007.

Tax credits allow investors to lower their tax liabilities. Upwards of 70 percent of low-income construction costs are financed by these tax credits.

According to University of Michigan urban planning professor Lan Deng, “(Tax credits) is the only program that subsidized new affordable-housing production … (It) has become the only game in town. This provides a huge amount of money, and (reliance on tax credits is) getting bigger and bigger.”

Source: Wall Street Journal (02/04/09) P. A4; Drucker, Jesse; and Christian Science Monitor (02/06/09) P. 4; Kutner, Jeremy

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