Tue, Dec 26, 2017 - Page 10 News List

Trump’s tax cuts will hurt affordable housing: group

Thomson Reuters Foundation, SEATTLE

US President Donald Trump holds up a tax overhaul bill after singing it into law in the Oval Office on Friday.

Photo: Bloomberg

The new US tax law could have negative effects on the production of affordable housing at a critical time of rising demand across the US, low-income housing advocates said.

The US Congress passed the Tax Cuts and Jobs Act of 2017 and US President Donald Trump on Friday signed the bill into law, keeping a promise to deliver a tax cut by Christmas.

However, the 503-page act, which critics have said was rushed through Congress for speedy passage, could leave some collateral damage in its wake when it comes to affordable housing programs, the National Low Income Housing Coalition said.

“This bill will exacerbate our country’s already yawning income inequality, and will harm efforts to end homelessness and housing poverty,” coalition president and chief executive officer Diane Yentel said.

Housing advocates’ main concern is how the reduction in the corporate tax rate effects the market for Low-income Housing Tax Credit program, the fiscal mechanism responsible for the largest share of privately built affordable housing in the US.

US corporations purchase these credits, which reduce their tax bill, by investing in affordable housing developments.

A lower corporate tax rate means private companies will have less incentive to invest in the production of affordable housing.

Analysis by public accounting and consulting firm Novogradac & Co said the change would reduce the supply of affordable rental housing by nearly 235,000 homes over 10 years.

“At a time when we should be increasing investments in solutions to the housing crisis impacting low-income people across the country, the increased deficits created by these tax cuts puts the national Housing Trust Fund and other vital housing and community development programs at risk of deep spending cuts down the line,” Yentel said.

The repercussions of changes to that market will be felt across the US, where there is a shortage of 7.4 million affordable homes for renters living at or near the poverty line, according to a coalition report.

In Seattle, where increases in home prices led the nation for the 13th straight month last month, local officials are bracing for the impact.

“We think lowering the corporate tax rate from 35 to 21 percent without making other changes to the housing credit will mean a 14 percent reduction in the number of affordable homes we are able to create in Seattle,” Seattle Office of Housing Director Steve Walker said. “In 2017, this would mean an impact of approximately 125 less affordable homes being built, or at least one building, at a time when we face an affordability crisis.”

Trump touted the corporate tax rate reduction as a boost to the US economy, saying it would mean more products were made in the US and bring back companies.

Low-income housing advocates said the final tax bill was an improvement on earlier versions, which would have entirely eliminated the tax credit program and another affordable housing tool, tax-exempt Private Activity Bonds.

Such a course of action would have had “an immediate devastating impact on affordable housing,” Yentel said.

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