Trump tax pro­posal cuts funds for af­ford­able homes in re­gion

The Washington Post Sunday - - METRO - BY ROBERT MCCART­NEY

The pool of pri­vate funds avail­able to build or pre­serve af­ford­able hous­ing in the United States has shrunk by about $1 bil­lion since Novem­ber, and Pres­i­dent Trump’s tax plan is to blame — even though it hasn’t been adopted yet.

The pres­i­dent’s pro­posal to slash the tax rate for cor­po­ra­tions has had the side ef­fect of weak­en­ing a fed­eral tax-credit pro­gram that sup­plies the main flow of money for apart­ment build­ings for low-in­come peo­ple in the Wash­ing­ton area and na­tion­wide. It’s been the big­gest set­back for such fi­nanc­ing since the 2008 re­ces­sion.

Banks and other in­sti­tu­tions have curbed how much they’re in­vest­ing via the low-profile pro­gram, be­cause they won’t need the ben­e­fits as much if their tax rate is re­duced by more than half as the ad­min­is­tra­tion pro­poses.

The re­sult has been a drop of at least 10 per­cent since the elec­tion in the $14 bil­lion of pri­vate money in­vested an­nu­ally in the Low-In­come Hous­ing Tax Cred­its pro-

gram, ac­cord­ing to in­dus­try an­a­lysts. That’s enough to fi­nance about 8,000 af­ford­able rental units.

For now, states, cities and de­vel­op­ers are dig­ging deeper into their pock­ets to pro­vide ex­tra funds to fill the gap. But that de­pletes money avail­able for other hous­ing projects and re­lated pro­grams. And some projects have been can­celed al­to­gether, or re­main in limbo as de­vel­op­ers wait to see if lo­cal au­thor­i­ties come through with nec­es­sary funds.

The drop in sup­port for af­ford­able hous­ing un­der­cuts high-pri­or­ity ef­forts by state and lo­cal gov­ern­ments to ac­cel­er­ate pro­duc­tion of low-cost apart­ments to com­bat gen­tri­fi­ca­tion and slow the widen­ing of the eco­nomic di­vide be­tween af­flu­ent and dis­ad­van­taged pop­u­la­tions.

“Th­ese are deals that are al­ready hard enough to fi­nance,” said Corey Pow­ell, chief op­er­at­ing of­fi­cer of Dantes Part­ners, a Dis­trict de­vel­oper that spe­cial­izes in low-cost hous­ing. “This just puts a new bur­den on scarce re­sources for af­ford­able hous­ing.”

In ad­di­tion, hous­ing of­fi­cials fear their chal­lenges will grow even larger be­cause the ad­min­is­tra­tion wants to cut spend­ing on rental vouch­ers and other fed­eral pro­grams that are also crit­i­cal to pay­ing for low-cost hous­ing projects. The White House pro­posed to re­duce the bud­get for the U.S. Depart­ment of Hous­ing and Ur­ban Devel­op­ment by 15 per­cent, or $7.4 bil­lion.

“It’s a dou­ble whammy, with the [tax credit] changes cou­pled with even­tual scarcity of fed­eral re­sources,” Holly Glauser, di­rec­tor of devel­op­ment for the Penn­syl­va­nia Hous­ing Fi­nance Agency, said. “It re­ally drives down the num­ber of units you are go­ing to be able to as­sist with.”

In North­ern Vir­ginia, a plan to ren­o­vate 204 low-cost apart­ments for se­niors at the non­profit Culpep­per Gar­den fa­cil­ity in Ar­ling­ton has hit two ob­sta­cles. First, the change in the tax-credit mar­ket cre­ated a hole of nearly $2 mil­lion in a $60.5 mil­lion fi­nanc­ing pack­age put to­gether by the de­vel­oper, Wes­ley Hous­ing.

In re­sponse, Wes­ley and Culpep­per Gar­dens re­struc­tured the deal and think it can still go through — but it de­pends on ob­tain­ing fed­eral vouch­ers that help res­i­dents pay the rent.

“If we don’t get those vouch­ers, the gap couldn’t be closed, and the deal might not get done,” Paul Browne, vice pres­i­dent of real es­tate at Wes­ley, said.

The Trump White House has pro­posed to cut the voucher pro­gram, but it’s not clear whether that will af­fect projects like Culpep­per that are al­ready in the works. HUD Sec­re­tary Ben Car­son told Congress on June 7 that the spend­ing cuts are needed to save tax­payer money, to pro­mote “free­dom from reg­u­la­tions and bu­reau­cracy,” and sup­port “a path to self suf­fi­ciency” for low­in­come peo­ple.

The out­come mat­ters to the el­derly res­i­dents at Culpep­per. Gar­netta Spriggs, 88, is ea­ger to see the ren­o­va­tion go through be­cause it would mean hav­ing wash­ing ma­chines and dry­ers on ev­ery floor.

“I wouldn’t have to lug my laun­dry all the way down to the base­ment,” said Spriggs, who lives on the eighth floor.

Like other res­i­dents at Culpep­per, Spriggs said she could not af­ford to live else­where. Her only in­come is her pen­sion from work­ing as a CIA com­puter op­er­a­tor. She pays $894 a month for an ef­fi­ciency apart­ment.

“It helps me to con­tinue to be in­de­pen­dent and not rely on my chil­dren,” Spriggs said.

The build­ing has not been ren­o­vated since it opened in 1975. The re­ha­bil­i­ta­tion is nec­es­sary to re­place out­dated heat­ing and cool­ing sys­tems, im­prove kitchens and light­ing, and meet re­quire­ments of the Amer­i­cans With Dis­abil­i­ties Act.

Robert Woods, 68, looks for­ward to the up­graded heat­ing and air con­di­tion­ing. At present, res­i­dents are able to heat or cool their apart­ment, but can­not switch from one to the other in re­sponse to tem­per­a­ture changes.

Woods said he lives at Culpep­per be­cause his only in­come is his So­cial Se­cu­rity check. His sav­ings evap­o­rated af­ter his sedan busi­ness at Dulles In­ter­na­tional Air­port col­lapsed in the wake of the Sept. 11, 2001, ter­ror­ist at­tacks. He pays $820 for a one-bed­room apart­ment, in ad­di­tion to re­ceiv­ing a county sub­sidy of about $200 a month.

“Only through what they of­fer here could I have any money left to buy clothes or food,” Woods said.

The short­age of low-cost hous­ing in Amer­ica is rou­tinely called a “cri­sis.” A re­cent re­port by the Joint Cen­ter for Hous­ing Stud­ies at Har­vard Univer­sity found that about 11.1 mil­lion renter house­holds were “se­verely cost bur­dened” in 2015, which means they spent more than half their in­comes for hous­ing.

The drop in fi­nanc­ing avail­able via fed­eral tax cred­its be­gan with Trump’s elec­tion, when in­vestors re­al­ized that Repub­li­can con­trol of both the White House and Congress could lead to a his­toric tax-re­form pack­age.

Trump has pledged to lower the cor­po­rate tax rate from 35 per­cent to 15 per­cent. He says that would im­prove Amer­i­can com­pa­nies’ com­pet­i­tive­ness and free up pri­vate re­sources to cre­ate new jobs.

“The uncer­tainty of what tax rates might be in the fu­ture im­me­di­ately caused in­vestors to take a step back,” said Beth Mullen, na­tional di­rec­tor of Cohn-Reznick’s af­ford­able hous­ing in­dus­try prac­tice.

She and other ex­perts said it was the big­gest dis­rup­tion in the mar­ket since the hous­ing mar­ket col­lapse nine years ago.

In the Dis­trict, the drop cre­ated a short­fall to­tal­ing $15.6 mil­lion that put at risk 13 projects to build or re­ha­bil­i­tate 1,225 low­cost rental units. But pro­tect­ing af­ford­able hous­ing is a sig­na­ture is­sue for Mayor Muriel E. Bowser (D), and the city has an un­usu­ally large trust fund, called the Hous­ing Pro­duc­tion Trust Fund, to sub­si­dize such ef­forts.

As a re­sult, the Dis­trict agreed re­cently to in­vest $12.8 mil­lion to en­sure that the 13 projects go for­ward.

“We’re only able to fill that gap be­cause we’re a city with abun­dant lo­cal funds,” Al­li­son Ladd, deputy di­rec­tor of the Dis­trict’s Depart­ment of Hous­ing and Com­mu­nity Devel­op­ment, said.

The down­side is that the Hous­ing Pro­duc­tion Trust Fund was de­pleted faster than ex­pected. That will re­duce the city’s abil­ity to fi­nance projects still in the pipe­line.

“It means there’s less funds for the fu­ture,” Ladd said.

Penn­syl­va­nia also stepped in re­cently and shifted $4 mil­lion to sal­vage eight projects, which had fi­nanc­ing that would oth­er­wise have col­lapsed be­cause of the shrink­age of tax-credit fi­nanc­ing.

“We cob­bled things to­gether. We shook the couch cush­ions to make it work,” Glauser, of the state hous­ing fi­nance agency, said.

The price was a loss of funds for other pri­or­i­ties in­clud­ing fund­ing home­less shel­ters and rental as­sis­tance in ru­ral coun­ties.

The loss of tax-credit fi­nanc­ing has had its most se­vere im­pact in ru­ral ar­eas, towns or small cities, where in­vestors are wary of fi­nanc­ing af­ford­able hous­ing in the first place.

“Ru­ral mar­kets in Ohio got hit harder than Colum­bus, Cincin­nati and Cleve­land,” said Brian W. Coate, vice pres­i­dent at Lan­caster Pol­lard, an Ohio-based lend­ing firm. In­vestors “are more ex­cited about in­vest­ing in a city. They think the hous­ing mar­ket is go­ing to be more sta­ble,” he said.

Culpep­per Gar­den res­i­dent Woods of­fered a bit of dark hu­mor when asked what he’d do if he lost his sub­si­dized apart­ment.

“There’s a lot of new bridges they’ve built you can live un­der,” he said.

BON­NIE JO MOUNT/THE WASH­ING­TON POST

Lor­raine Tartaglione re­laxes with her dog, Sunni, at Culpep­per Gar­den. The fa­cil­ity is plan­ning a ren­o­va­tion, but Trump’s tax-code pro­pos­als and other fund­ing cuts have put the up­grades in jeop­ardy.

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