WASHINGTON–How the tax reform plans currently before the House and Senate play out will affect credit union members in numerous ways, including housing.
In addition to debate around the future of the mortgage deduction, another analysis is suggesting that should the plans move forward as currently written they will “decimate” production of new affordable rental housing, even though a housing shortage is driving up both rents and new home prices.
According to analysis by MarketWatch, the House Ways & Means Committee’s plan preserves the Low Income Housing Tax Credit, while at the same time effectively gutting it. That’s because about half of all low-income housing credit development is done in conjunction with private activity bonds, a financing method that the plan scraps, MarketWatch reported.
Private activity bonds are tax-exempt bonds issued by municipal government entities for special projects, often involving a private developer, MarketWatch said, citing Council of Development Finance Authorities’ data showing that in each of the five years after the recession, an average of about $5 billion of PABs were issued for housing. Issuance surged to $14 billion in 2016.
“What’s more, the other half of all affordable housing deals, which rely purely on the tax credit program, would become more expensive as tax rates go down and make tax credits worth less,” MarketWatch said.
One analyst told MarketWatch that the changes together will result in a reduction of about two-thirds of new affordable housing units each year for the next decade.
Separately, the National Low Income Housing Coalition, a Washington-based advocacy organization, estimates they will result in the loss of over 80,000 affordable housing units every year.