Tax bill would stifle affordable housing
Low-income Texans have been struggling for years to find an affordable place to live, a struggle intensified by the devastating effects of Hurricane Harvey, and we must devote every resource we have to changing that trend. On top of that, we must ensure that the post-Harvey recovery push is not left without the sources of capital necessary to finance the rebuilding effort. Congress simply cannot brush these issues aside. They are far too important.
The tax-exempt Private Activity Bond program is one of the most effective tools that we have for financing new affordable housing. Unfortunately, while debate over tax reform generally has been focused on corporate and individual tax rates, the House of Representative bill is set to kill this critical program, which would put the future of affordable housing construction in Texas and across the nation at risk and unintentionally but severely harm efforts to repair and rebuild the homes of Texans impacted by Hurricane Harvey.
As originally proposed by President Ronald Reagan and adopted as part of the Tax Reform Act of 1986, if a housing project agrees to charge affordable rents to lower-income residents and is financed using PABs, the project will also generate Federal Low-Income Housing Tax Credits (LIHTCs). Because it costs the same to build and operate an affordable housing project as it does to build market-rate housing, the reduction in revenue resulting from these lower rents would otherwise make these projects financially infeasible. The LIHTCs are used to “fill the gap” in covering the cost of construction, thereby allowing for the production of new affordable housing.
In Texas alone, PABs have provided more than $2.9 billion since 2013 in financing to create and preserve much needed affordable housing. The elimination of PABs would cripple this program and others like it around the country, ruining the hopes of thousands of Texans seeking a decent, safe and affordable place to call home.
The damage from Hurricane Harvey continues to impact many Texas residents, a factor which greatly enhances the threat by the tax reform bill. More than 750,000 Texans have applied for individual assistance from FEMA in the wake of the hurricane, about 300,000 of whom have already been approved. A significant number of these residents live in homes that were severely damaged by the storm. Some were forced to relocate as a result of that damage.
Financing generated by PABs (and the associated LIHTCs) will be vitally important to hurricane recovery efforts, especially in Houston and along the Gulf Coast, where historic flooding brought about unprecedented damage. Congress, by eliminating a vehicle of financing, will make these efforts even more difficult and leave residents to fend for themselves after suffering from a natural disaster of historic proportions.
Fortunately, all is not lost. Congress still has the opportunity to act and do the right thing by rejecting the tax plan in its current form and reworking the proposal to guarantee that PABs are protected and that LIHTCs are not just sustained but also strengthened for generations to come.
If this simple step is taken now, residents across our state and across the nation will benefit. They will feel more secure in the future of their housing options and know that their elected officials support them in the face of disaster. If Congress ignores this warning, low-income renters, prospective homeowners and those affected by Hurricane Harvey will pay a disastrous price.