A coalition of more than 900 affordable housing stakeholders are urging legislators to extend the minimum 9 percent low-income housing tax credit (LIHTC) rate for new construction and substantial rehab and establish a minimum 4 percent rate for the acquisition of affordable housing before the legislative session ends.
Industry leaders at the AHF Live conference last week in Chicago said they were optimistic that a two-year extenders package would be passed before Congress leaves town in December.
“We think it’s going to get done. We’re still confident we’re going to get the 9 percent fix rate for 2015,” said David Gasson, vice president of Boston Capital and executive director of the Housing Advisory Group.
What is not likely to happen in the near future is tax reform, agreed panelists on the “Capitol Hill Update” panel.
“Tax reform will not happen until the next president (him or her) swings a lantern over the White House lawn because you’ve got to have an administration, Treasury Department, and Congress who are ready to roll,” said Bob Moss, director of governmental affairs at CohnReznick.
Bobby Rozen, principal at Washington Council Ernst & Young, said he’s not sure the nation will see tax reform after the presidential election either.
He said there’s a 50-50 chance that that White House will release a detailed tax reform plan next year, but it won’t move legislation.
There are two fundamental issues, he added. The first hurdle is that Republicans when they talk about reform want the individual rate down.
“When Dave Camp released his tax reform draft with the 35 percent rate, you didn’t see Republicans embracing that. That’s the reality that he couldn’t do more than that. The goal for Republicans is 25 percent for corporate,” Rozen said. “For Democrats, the fundamental goal of tax reform does not include reducing the top rate for individuals.”
The second hurdle is the question of revenues. “The Camp draft would have increased the deficit quite a bit in the out years. Everyone is concerned by the future budget situation,” he said.
The positive news for the affordable housing industry is that the LIHTC was one of the only tax expenditures to land in Camp’s tax reform draft. “It goes on the shelf, and the person taking the book off that shelf is [incoming Ways and Means chair] Paul Ryan (R-Wis.),” said Moss.
“The industry did a great job with building up Republican support on Ways and Means over the last couple of years. We have taken for granted Democratic support on the committee,” added Rozen. “Paul Ryan doesn’t have much history with the LIHTC. We can’t say he’s a supporter of the program, but he hasn’t been an opponent. The difference with Paul Ryan is that he has sway with the Republican caucus, and I think he’s in a better position to legislate than Dave Camp.”
Another issue on industry leaders’ radar is funding for the Department of Housing and Urban Development (HUD).
“HUD is under exceptional pressure right now. Eighty-six percent of the budget is consumed by five programs, and the two Sec. 8 programs are really effectively cannibalizing the rest of the housing budget,” said former Congressman Rick Lazio, a partner at the Jones Walker law firm. “We are in a housing crisis here. It’s also playing out on the Hill because that budget has not being keeping up with the need on the outside.
Rozen agreed. “What they have been really cannibalizing is our gap financing from the HOME and CDBG programs,” he said. “In fiscal year 2016, sequester goes back into effect. If it does, you’re just looking at continued further cuts at HOME and CDBG. We’re facing real, real huge problems on the gap financing side.”
The panelists urged that it’s time to again start educating members of Congress again about the LIHTC as well as other federal subsidies.
Meg Manley, senior vice president of McCormack Baron Salazar, also said developers need to be conscious of what they are doing with the federal funds.
“We have to be stewards of these federal funds. We have created the strongest asset class in the country,” she said. “But we are in a world of shrinking gap resources, and we can’t take more than we need. You have to watch those subsidies. If we’re going into tax reform, we have to watch our Ps and Qs on that.”