Fed Tax Cut To Hurt Affordable Housing Incentive

Governing Magazine reports that the change to the federal tax law will likely reduce the incentive to create affordable housing.  See it here.

“[B]ecause of the new tax law, the affordable housing shortage is expected to get worse.  By one estimate, developers will build nearly 235,000 fewer affordable rental units in the next decade. The reason? Congress diluted tax incentives that fueled the construction and rehabilitation of low-cost rental housing…

The primary way that all levels of government (federal, state and local) facilitate the production of affordable housing is through the federal Low Income Housing Tax Credit, which Congress created in its last major tax package under President Ronald Reagan. Between 1995 and 2015, the tax credit spurred the creation of more than 2 million affordable housing units, according to the U.S. Department of Housing and Urban Development (HUD).

The Tax Cuts and Jobs Act that Congress passed just before Christmas, however, makes that tax credit less attractive. Now that the corporate tax rate is only 21 percent (down from 35 percent), affordable housing investors (which are mostly banks) will owe significantly less in taxes and have less of a need to buy tax credits from developers…

Originally in February 22 MOScout.