House Tax Bill ‘Would Have Devastating Impact on Affordable Housing in New England’

By: Leslie Black-Plumeau

From the Vermont Affordable Housing Coalition -

Advocacy organizations from around New England, including the Vermont Affordable Housing Coalition, are announcing their opposition to provisions of the tax cut proposal released by Speaker Paul Ryan (R-WI) and Representative Kevin Brady (R-TX) last week.
“The House tax bill would have devastating impacts on the creation and preservation of affordable housing in Vermont,” said Sarah Carpenter, Executive Director of the Vermont Housing Finance Agency. “Almost 15,000 Vermonters in every region of the state live in safe, stable and affordable rental housing thanks to the federal Low Income Housing Tax Credit, which will be significantly weakened through this bill. The bill would also reduce low cost home mortgage and development financing offered by VHFA and the subsidies that come with those programs. Its passage would be a major setback in our efforts to alleviate Vermont’s dire shortage of affordable housing.”
At a time when we already have a regional shortage of 338,149 affordable rental homes for extremely low income households, the tax proposal would eliminate tax credits that have helped create hundreds of thousands of affordable homes for New Englanders with low and moderate incomes.
“This tax proposal would reduce private investment in affordable housing, worsen our regional housing crisis, and set up massive future budget cuts,” said Rachel Heller, CEO of the Citizens’ Housing and Planning Association in Massachusetts and coordinator of the New England Housing Network. “We need our federal representatives to reject these provisions and pursue real tax reform that helps address our housing crisis and protects struggling low- and moderate-income people.”
Vermont has a well documented need for more affordable housing across all income ranges.  The Vermont Futures Project of the Vermont Chamber of Commerce set a growth target of 5,000 new and improved housing units annually.  The legislatively mandated Roadmap to End Homelessness report calls for 180 new units of permanent supportive housing and 1,251 new homes affordable for extremely low income Vermonters over the next five years. 
“In response to an unprecedented need, Governor Scott proposed -- and both House Speaker Johnson and Senate Pro Tem Ashe supported and passed -- a historic $35 million housing bond earlier this year,” said Gus Seelig, Executive Director of the Vermont Housing and Conservation Board. “The bond relies on the leverage of these key federal tax credits and the reinvestment tax credit to produce 550 – 650 new affordable homes for Vermonters.  Without tax credit equity, which is the largest share of funding in affordable housing developments, we will fall far short of our goal, and affordable rental housing production will soon come to a grinding halt.”
In addition to significantly weakening the federal Housing Tax Credit, the House bill would eliminate the New Markets Tax Credits and Historic Tax Credits. “Housing and community development investments work together in revitalizing neighborhoods; neither investment can do it alone,” said Nancy Owens, President of Housing Vermont. “New Markets and Historic Tax Credits are indispensable tools in our efforts to revitalize Vermont’s downtowns and village centers and create and retain quality jobs for Vermonters.”
While the need remains enormous, we have been making progress. The annual Point-in-Time census of homelessness showed a 20 per cent decrease statewide over the last two years. “Vermont has long been a leader in affordable housing, and many of our communities are making progress in decreasing housing instability and homelessness,” said Sara Kobylenski of the Upper Valley Haven. “But, we cannot do this on our own. We need Congress to fully invest in resources that help people keep a roof over their heads. Instead, this bill would leave people out on the street and hurt our communities.”
The House tax proposal:

  • Significantly weakens the Low Income Housing Tax Credit, a successful public-private partnership that has become the foundation for affordable housing development across New England and the nation. While the credit itself is retained, it would be significantly weakened due to the corporate tax rate being significantly lowered. With less of a need for tax credits, the value of the Low Income Housing Tax Credit would drop, greatly reducing investments in low income housing by private companies. The tax proposal contains no changes to the credit that would help address this impact. This could mean an annual loss of over $4.5 million in subsidy in Vermont.
  • Eliminates the tax exemption on Private Activity Bonds, including multifamily and homeownership housing bonds for low and moderate income families. This tax exemption allows bond-financed multifamily rental projects to access ‘4% Housing Credits,’ which have helped produce or preserve tens of thousands of affordable homes in New England. In Vermont the elimination of bond credits could mean a loss of over $6 million a year in affordable rental housing subsidy.  The loss of tax-exempt housing bonds would also eliminate Mortgage Credit Certificates and some of the reduced interest mortgages offered by VHFA to Vermont homebuyers.
  • Eliminates the New Markets Tax Credit, a vital resource for community revitalization efforts in distressed areas. In Vermont, projects supported by the New Markets Tax Credit include Brooks House in Brattleboro, the Putnam Block in Bennington and the French Block in Montpelier, to name just a few.
  • Eliminates the Historic Rehabilitation Tax Credit, which has had a great impact on communities all across the state. This credit attracts developers to invest in once vacant, deteriorated, and underutilized structures and transforms them into much needed housing and commercial space. Hundreds of Vermont’s historic and iconic buildings have been returned to use, creating homes, jobs, and tens of millions in new local tax revenues.
  • Reforms the Mortgage Interest Deduction, which has been a long-standing effort of housing advocates and would ordinarily be a major step in the right direction. Unfortunately, the tax proposal uses the resulting savings to pay for tax cuts, not to fund new investments in affordable housing.
  • Increases the federal deficit by $1.5 trillion, putting immense pressure on lawmakers in future years to make massive cuts to programs benefiting low- and moderate-income people, include federal housing programs.