January 19, 2018

Community Developments: The Impact of Tax Reform on Affordable Housing Production

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  • An article in The New York Times explores the harmful effects of tax reform on affordable housing production. According to the article, the reduction of the corporate tax rate from 35 to 21 percent in the Tax Cuts and Jobs Act is expected to cut demand for the Low-Income Housing Tax Credit (Housing Credit) - an analysis by Novogradac and Co. shows that the lower corporate tax rate is expected to reduce affordable housing production by nearly 235,000 rentals over the next decade. The article notes that this potential effect would compound the existing shortage of affordable housing, and developers have begun seeking new financing sources and scaling back long-term affordable housing development plans. The article suggests that the Affordable Housing Credit Improvement Act (S. 548), bipartisan legislation proposed by Senators Maria Cantwell (D-Wash.) and Orrin Hatch (R-Utah), would provide a fix to the expected losses by expanding the Housing Credit by 50 percent. (The New York Times, January 18)
     
  • The House passed a short-term spending measure last night to avert government shutdown, but the bill’s future remains uncertain in the Senate where 60 votes are required to pass the chamber and break a filibuster. The House continuing resolution (CR), which would extend funding through February 16, includes a six-year re-authorization of the Children’s Health Insurance (CHIP) Program; however, it does not protect the Deferred Action for Childhood Arrivals (DACA) program that expires on March 5. The Senate would need to reach a deal and pass what would be a fourth continuing resolution for fiscal year 2018 before 11:59 pm Friday to avoid a government shutdown. (The Hill, January 18; CNN Politics, January 19)
     
  • In an op-ed, Jude Kende, vice president and New York market leader at Enterprise Community Partners, discusses how the state’s housing market could be better for senior citizens. Kende notes that the state must adapt to enable its growing senior population to age in place and access the resources and services they need to thrive, including adequate affordable housing for seniors and on-site services that can cut costly and unnecessary hospitalizations or premature nursing home stays. The op-ed urges the state, which was designated the first age-friendly state in the nation by AARP and the World Health Organization and committed $125 million to senior housing, to provide a $10 million, five-year investment in resident service coordinators for seniors in subsidized housing in 2018, in order to give its senior citizens the support they need to age in place and continue contributing to their communities. The op-ed also suggests that this investment would pay for itself as seniors rely less on Medicaid and costly emergency services and more on local supports and preventive care that keep them healthy and housed. (Times Union, January 18)
     
  • As previously reported in Community Developments, the Federal Housing Finance Agency outlined a proposal for housing finance reform that would reconstitute Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) into privately owned utilities with access to an explicit government guarantee against catastrophic loss. According to an article in the American Banker, Senate negotiators are considering a bill that would deviate substantially from this proposal. The proposed bill would place the GSEs into receivership, replace them with multiple mortgage guarantors, and eliminate their affordable housing goals in favor of an incentive system for lending in underserved areas. Sources note that the bill remains subject to ongoing negotiations. (AmericanBanker, January 18)
     
  • According to newly released Commerce Department data, building permits dropped slightly to 1.3 million and new housing starts decreased by 8.2 percent in December to a seasonally adjusted annual rate of 1.19 million, the largest percentage drop since November 2016. The sharp decline in housing starts can be largely explained by the drop in single-family homebuilding, which declined by 11.8 percent to 836,000 units. Despite the decline in building permits and housing starts in December 2017, building permits and housing starts rose by 2.7 and 2.4 percent, respectively, between 2016 and 2017. (HousingWire, January 18) 
     

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