Senate Finance Committee Holds Hearing on Affordable Housing
Today the Senate Finance Committee held a hearing on "America’s Affordable Housing Crisis: Challenges and Solutions." In a bipartisan show of support for affordable housing, members of the Committee from both sides of the aisle acknowledged the need for more affordable housing and the role of the Low-Income Housing Tax Credit (Housing Credit) as our nation’s primary tool for increasing the supply of affordable rental housing.
The Affordable Housing Credit Improvement Act (S. 548) featured prominently in the discussion, and there were many comments from witnesses as well as members of the Committee about the need to strengthen and expand the Housing Credit. There are currently 20 Senators signed on as co-sponsors of S. 548, including seven members of the Finance Committee.
The witnesses were:
- Daniel Garcia-Diaz, Director, Financial Markets and Community Investment, United States Government Accountability Office (GAO). Garcia-Diaz’s testimony focused on the three GAO reports issued on the Housing Credit over the past three years, which reviewed issues of federal administration, state administration and the role of syndicators. He raised findings regarding data collection and IRS oversight of the program, and recommended that further investment be made in oversight of the program. The GAO is currently working on a fourth report on the topic of Housing Credit development costs, which is expected to be completed in early 2018.
- Grant Whitaker, President and CEO of the Utah Housing Corporation and President of the National Council of State Housing Agencies (NCSHA). Whitaker’s testimony described the scale of the affordable housing crisis and the role of the Housing Credit and Housing Bonds in addressing it, citing specific examples of these programs’ success in helping to house veterans and chronically homeless individuals in Utah. He also encouraged all Senators to co-sponsor S. 548, urging that, “This crisis will only get worse unless we act.”
- Kathy O'Regan, Professor of Public Policy and Planning at the Furman Center and former Assistant Secretary for the HUD Office of Policy Development and Research. O’Regan’s testimony focused on the increasing number of households experiencing high cost burden, especially among the lowest income renters. She argued that now is an “opportune time to make substantive improvements” to the Housing Credit, citing several key provisions in S. 548, including income averaging, the basis boost for apartments serving extremely low-income tenants, prohibiting local approval requirements, clarifying requirements around the definition of a concerted community revitalization plan, setting a minimum 4 percent Housing Credit rate, and promoting development in Native American communities.
- Kirk McClure, Professor of Urban Planning at the University of Kansas. McClure’s testimony acknowledged that the Housing Credit is “a good program” but suggested several reforms to promote the use of market studies to ensure that developments are cited in locations with the greatest need, to allow state housing finance agencies to exchange Housing Credit authority for voucher authority, to encourage rehabilitation over new construction, and to promote mixed-income developments.
- Granger MacDonald, Chairman of the Board of the National Association of Home Builders (NAHB). MacDonald’s testimony stated that “housing affordability has reached crisis proportions,” and that the first step to addressing the crisis is to pass S. 548. He underscored that it is economically infeasible to develop homes that are affordable to low-income renters without the Housing Credit, and enumerated the many benefits of affordable housing for residents – including breaking the cycle of poverty by providing greater stability for residents – as well as the broader economic impacts for communities.
In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-UT), lead Republican sponsor of the Affordable Housing Credit Improvement Act, described the affordable housing crisis as “a problem that should be ready for a bipartisan solution,” and throughout the hearing expressed support for S. 548 as an important step to make a meaningful dent in the affordable housing crisis. “One reason I support the Housing Credit,” Chairman Hatch said, “is that it keeps decision-making away from D.C., and keeps it in communities while involving the private sector.” Hatch also outlined broader principles for tax reform, including fairness, efficiency, simplicity, and American competitiveness.
Senate Finance Committee Ranking Member Ron Wyden’s (D-OR) opening statement reaffirmed his support for S. 548 and called on the committee to pursue bipartisanship both in advancing this bill and in tax reform more broadly. “Senators Cantwell and Hatch are demonstrating how the two sides can work together on major economic challenges,” Ranking Member Wyden said. “After a heated few weeks in the Senate, I know both sides crave a return to bipartisanship and regular order, and for this committee that would mean tax reform is likely on the horizon.”
In her remarks, Senator Maria Cantwell (D-WA), lead sponsor of the Affordable Housing Credit Improvement Act, highlighted the role of the Housing Credit in serving urban as well as rural communities, and responding to specific needs like veteran homelessness. She emphasized the growth in the number of cost-burdened renter households, citing projections from Enterprise and the Joint Center for Housing Studies that the number of renter households who pay more than half of their income towards rent could grow to nearly 15 million by 2025. Senator Cantwell also underscored the high costs of inaction on the health and criminal justice systems, among others.
Prominent themes in the hearing included:
- The affordable housing crisis affects every state and all types of communities. Senator John Thune (R-SD) noted that the affordable housing crisis affects rural communities in addition to the urban ones more often associated with the crisis, and asked about provisions in S. 548 to encourage affordable housing development in rural communities (of which there are several). Ranking Member Wyden said, “This crisis is a five-alarm fire across the country.” Senator Sherrod Brown (D-OH) also discussed the mismatch between wages and what it costs to rent housing in his own state, and quoted pediatrician and Enterprise board member Megan Sandel in describing affordable housing as a “vaccine” that is needed in order to keep children healthy.
- The Housing Credit is the primary tool to develop more affordable housing. Senator Johnny Isakson (R-GA), a co-sponsor of S. 548, called the Housing Credit “one of the best tools we have,” and confirmed with MacDonald of NAHB that none of the 4,700 affordable apartments that MacDonald had developed would have been possible without the Housing Credit. Several other members and witnesses also acknowledged that the Housing Credit is essentially the only tool the federal government has to add more affordable housing to our nation’s supply. But members also noted that other programs are needed in order to complement the Housing Credit, with Senator Bob Menendez (D-NJ) underscoring the importance of gap financing sources like Community Development Block Grants (CDBG) and the HOME Investment Partnerships Program, and Senator Ben Cardin (D-MD) highlighting the importance of the New Markets Tax Credit, historic tax credits and energy efficiency credits in revitalizing communities.
- Even successful programs can be made stronger. Ranking Member Wyden, who is an original co-sponsor of S. 548, said that the bill will help us “wring all of the value out of the Housing Credit.” Senator Cardin added that we need “stronger tools available,” and that he is “not squeamish about looking at ways to make programs more effective.” Senator Debbie Stabenow (D-MI) expressed her enthusiasm for the bill as well, indicating that she looks forward to being listed as an official co-sponsor, and discussed Michigan’s specific need for the provision to address planned foreclosures.
- Private sector and state oversight are critical to the Housing Credit’s success. In response to questions from Senator Chuck Grassley (R-IA) about oversight of the Housing Credit, Whitaker of NCSHA noted that state agencies are deeply involved in monitoring Housing Credit properties, including compliance audits and reviews of financial records, rent rolls and physical conditions. Garcia-Diaz of the GAO also acknowledged the role of the private sector in monitoring the program, noting that while syndicators “don’t relieve the federal government of the responsibility” of overseeing the program, they do “play a unique role in oversight of the Housing Credit.” Senator Isakson also observed that the Housing Credit “has about as many incentives as you can have in a program to take good care of the properties.” “I know it’s hard to track from the GAO’s perspective,” MacDonald of NAHB added, “but at the local level there’s a lot of oversight.”
- Adjustments to the Housing Credit will be needed in order to offset the impact of a lower corporate rate and other potential changes in tax reform. Even if there are no proposed changes to the Housing Credit in tax reform, other changes to the corporate tax code could negatively impact Housing Credit production. O’Regan of the Furman Center noted that, “any decrease in corporate tax rates also lowers the amount of equity raised by the credit,” and that Housing Credit equity could “decline by up to 17 percent under expected decreases in the corporate tax rate if per-capita allocations are not increased to keep pace.” Senator Thune also asked about the impact of a shorter depreciation period on Housing Credit investment, and MacDonald of NAHB noted that such a change could have a positive impact on Housing Credit pricing.
The Senate Finance Committee is accepting statements for the record in response to this hearing. Statements must be received no later than two weeks following the conclusion of the hearing, and instructions can be found on the committee's hearing webpage.
For more information about the Housing Credit and the Affordable Housing Credit Improvement Act, visit the ACTION Campaign website