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Uncertainty Over Tax Reform Is Already Hurting Affordable Housing
Tax reform will come quickly under the 115th Congress. The next steps lawmakers take will have a profound effect on the affordable housing crisis. By the time legislators break for recess in August, they may have significantly reshaped, and possibly scaled back, the hundreds of billions of dollars in housing aid and tax relief authorized by the federal government.
The housing market isn’t waiting for a sign from Congress about what action Republicans will take in revamping the tax code. Anticipating lower corporate tax rates, some investors are already limiting their investments in the Low Income Housing Tax Credit, the federal government’s primary instrument for creating new affordable housing in the U.S.
“We’re hearing from developers around the country that investors have either slowed or in some cases stopped investing in housing credits while they wait to see what happens with corporate tax reform,” says Diane Yentel, president and CEO of the National Low Income Housing Coalition.
Since 1986, developers have used LIHTCs to build millions of affordable-housing units. Banks invest in affordable housing developments by buying the housing credits and claiming various tax-liability benefits over a 10-year return period. Normally, everybody wins. But with future corporate tax rates uncertain, investors are hitting the pause button on LIHTCs while Congress prepares to enact comprehensive tax reform for the first time in 30 years.
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