Taxing Our Tolerance
For An Affordable Housing Crisis


By Mark Ridley-Thomas

There is no piece of legislation that weighs more heavily on Americans’ purse strings than the Republican tax reform proposal currently making its way through Congress.

While few can argue that our current tax code is anything short of byzantine, many of the provisions being considered by the Senate and House of Representatives would have a devastating impact on federal, state and local governments’ ability to provide vital services.

Repealing exclusions for adoption assistance programs, eliminating tax deductions for student loans and medical expenses, changing credits for producing electricity from renewable energy projects – these are just a few of the deeply troubling proposals projected to deepen the federal deficit.

The Senate’s bill creates a gap of $2.4 trillion over the next decade. The House of Representatives’ bill more than doubles that, to $5.9 trillion.

There are profound challenges in trying to create synergy among states with vastly different economic realities – most notably in their real estate markets. Much of the debate has centered on potential reductions to the mortgage interest deduction program, which is particularly alarming to individuals in states like California and New York, which abound with high-priced real estate. But there are other features in the House’s Tax Cuts and Jobs Act or HR 1 that dramatically threaten the housing market, and we should all pay attention.

The lure of lower tax brackets for all comes at a steep price: predictably worsening our affordable housing crisis. What about the word crisis doesn’t Donald Trump understand?

In California, financial support for affordable housing already suffered a huge setback in 2013 when redevelopment agencies – which were required to dedicate 20 percent of their tax increment to affordable housing – were dissolved.

Now, HR 1 proposes to eliminate multifamily housing bonds critical to the Low Income Housing Tax Credit program on which 40 percent of all housing developments nationwide rely for financing. In California, more than 99 percent of the affordable units built over the past 30 years have relied on tax credits, including nearly 20,000 last year alone. The elimination of this program would cost California $2.2 billion in federally catalyzed investments annually.

Given that Los Angeles County has a projected shortage of more than half a million affordable units, we can’t afford to lose this tool.

The proposed lowering of the corporate tax rate will also have deep implications for the tax credit market. Corporate investors buy tax credits to lower their annual federal tax bill for 10 years. If a corporation already has a lower tax bill, they would not have the same incentive to pay as much for tax credits, driving down their value.

But it’s not just affordable housing development that is threatened. HR 1 also proposes getting rid of the mortgage credit certificate program, which assists first-time homebuyers by providing federal tax credits on up to 20 percent of the annual interest paid on mortgage loans.

Without these programs, the search for an affordable home becomes even more out of reach for millions of Americans who live in a state of housing insecurity every day, whether already homeless or on the verge of being unable to afford rising rent.

Perhaps more than at any other time in our history, we have a president who has shown indifference to the economic inequalities that plague this nation. Taking away our most effective resources for facilitating the type of housing that is critical to creating diverse and inclusive communities will only exacerbate disparity and deepen division.

Incentivizing – not dismantling – the development of affordable housing should be front and center as Congress considers tax reform legislation. Indeed, this will help stabilize families and make our communities, from New York to California, stronger.