Will Federal Tax Cuts Devalue the Low Income Housing Tax Credit?

low income housing tax credit

Investors have less incentive to pursue the Low Income Housing Tax Credit if the business tax rate is cut as President Donald Trump pledged in 2016.

NEXT CITY

By Josh Cohen

President Donald Trump had a busy first few days in office. Trying to make good on his many campaign promises, he’s withdrawn the U.S. from the Trans Pacific Partnership trade agreement deal, moved forward on the controversial Keystone XL and Dakota Access oil pipelines, started the process of repealing the Affordable Care Act, canceled a planned Federal Housing Administration mortgage fee reduction for first-time homebuyers, and plenty more.

Trump hasn’t yet acted on his plan to slash the business tax rate from 35 percent to 15 percent, but the campaign pledge alone is already reshaping how affordable housing developers fund their work. The Low-Income Housing Tax Credit (LIHTC) has financed millions of rental housing units that are affordable to low-income Americans — and the promise of lower corporate tax rates has reduced its value in the eyes of investors.

“LIHTC’s role is huge. Anybody that does affordable housing development any place in the United States depends on LIHTC for all of their projects,” says Chris Persons, CEO of Capitol Hill Housing, a Seattle affordable housing developer.

For example, of the $23 million that Capitol Hill Housing spent on a recently built 88-unit rent-restricted apartment building, $5.6 million came from LIHTCs.

Continue reading the story on NextCity.org.

 

About the author

EfficientGov Staff

EfficientGov is an independent information service providing innovative solutions to fiscal and operational challenges facing cities and towns around the world.