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The Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (Housing Credit) is the nation’s largest and most successful tool for encouraging private investment in the production and preservation of affordable rental housing. Over the past 30 years, it has financed 3 million affordable apartments, providing homes to roughly 7 million low-income households.
 
In addition to the impact the Housing Credit has had on residents’ lives, our nation’s investment in Housing Credit development has had significant impacts for local economies. According to the National Association of Home Builders, the Housing Credit has generated $323 billion in local income and $127 billion in tax revenues, and has supported approximately 3.4 million jobs over the past 30 years, making the development of affordable housing an important component of our economic growth.

Though the Housing Credit has had a tremendous impact, much more affordable housing is still needed. There are still more than 11 million households in the U.S. paying more than half of their monthly income on rent, leaving too little for other expenses like health care, transportation and nutritious food. With more Housing Credit resources, we could make even greater progress towards addressing our nation’s vast and growing affordable housing needs.

Enterprise’s Housing Credit Impact

Enterprise is a national leader in socially-driven capital investment, matching investors with opportunities to yield economic returns alongside intentional and measurable impact for communities through the Housing Credit. Since 1982, Enterprise has invested $12.8 billion in Housing Credit equity to finance 151,200 homes. Each affordable home we have helped build or preserve represents a real person or family – and a platform to the opportunity for a more stable and rewarding life.

Enterprise also co-leads the Affordable Rental Housing ACTION (A Call to Invest in Our Neighborhoods) Campaign, a national grassroots coalition of nearly 2,000 organizations and businesses calling on Congress and the Administration to protect, strengthen and expand the Housing Credit.

About the Housing Credit

The Housing Credit is a model public-private partnership built on a “pay-for-success” model. The federal government awards credits only after properties are successfully completed and occupied, and can recapture credits for non-compliance. Private sector investors – not taxpayers – bear the financial risk, and are closely involved in monitoring and oversight. The Housing Credit is also administered at the state level, and through a competitive allocation process, only the affordable housing developments that are most responsive to local housing priorities receive credits.

The Housing Credit is responsible for financing nearly all affordable housing development in the U.S. Housing simply costs too much to build for owners to charge rents that are affordable to low-income households without an incentive like the Housing Credit.

Supporting the Housing Credit

Comprehensive tax reform was a top priority for the 115th Congress and the Trump Administration, and on December 22, 2017, President Trump signed the Tax Cuts and Jobs Act into law. The bill retained the Housing Credit as well as private activity bonds, including multifamily Housing Bonds, which finance roughly half of all Housing Credit developments. While the inclusion of these critical affordable housing financing tools was a major advocacy success and a testament to the programs' strong track record, the new tax system presents concerns for future affordable housing production. 

The Tax Cuts and Jobs Act lowered the corporate tax rate from 35 to 21 percent, which impacts pricing for the Housing Credit, and ultimately affordable housing production. A recent analysis by Novogradac & Co. estimates that the tax reform bill will reduce affordable rental housing production by nearly 235,000 homes over the next decade, the vast majority of which comes from the reduced corporate rate. The Tax Cuts and Jobs Act also created a base erosion and anti-abuse tax (BEAT), which could also have a further negative impact on the Housing Credit equity market. 

One of Enterprise's top priorities for 2018 is to continue advocating to expand and strengthen the Housing Credit through the Affordable Housing Credit Improvement Act. This legislation will not only restore affordable housing production in light of the Tax Cuts and Jobs Act, but make a meaningful step towards addressing our nation's vast and growing shortage of affordable housing.

Visit the ACTION Campaign website for the latest news on the Housing Credit, advocacy tools and other Housing Credit resources.