To commemorate the 20th anniversary of the low-income housing tax credit program, Affordable Housing Finance interviewed the principal author of the program, former Sen. George Mitchell (D-Maine)
Back in 1986, few people in the housing industry and in politics, including himself, expected the tax credit program to be the most successful affordable housing program in U.S. history, Mitchell said.
Mitchell presided as Senate majority leader from 1989 to 1995. After that, he chaired the all-party peace negotiations in Northern Ireland that culminated in the Belfast Peace Agreement in 1998. Now, at the age of 72, he is serving as chairman of the Walt Disney Co. He was recently named by Major League Baseball to lead an investigation into steroid abuse by players.
Q What prompted you to create the low-income housing tax credit program 20 years ago?
The program was created during Senate deliberations on the Tax Reform Act of 1986. The tax code had provided various incentives for the development of affordable housing, which were to be repealed in the bill approved by the Senate Finance Committee. I was contacted by a number of groups working on affordable housing issues that were very concerned about the prospects for eliminating all investment incentives for the development of rental housing for lower-income households. I shared their concerns that the government continue to encourage affordable housing development, and I was pleased to work on the housing credit because it was such a vast improvement on the previous tax incentives.
Q What was the biggest challenge in creating this program?
The biggest challenge was in creating a new tax incentive as part of tax reform legislation that was designed to eliminate many of the existing tax incentives in the law. Beyond that, it was a challenge to make sure that we were designing a program that would serve as an effective incentive to build affordable housing. Our initial efforts in 1986 were incomplete, so the program was overhauled in important respects in 1989, largely based on the recommendations of a task force of housing experts that Sen. John Danforth (R-Mo.) and I established.
Q How is today’s program meeting your expectations? How is it not?
The program is exceeding our expectations in every respect. As I noted above, at the time of enactment we were not sure the program would work. We did not envision that it would become the most successful affordable housing program ever created in this country, responsible for the development of nearly two million rental units. Nor could we have expected that it would have such strong bipartisan support in Congress and across the country.
Q What is the biggest threat to the tax credit program today?
I think the biggest threat to any federal program that subsidizes private sector investment is that at some point it will be abused by individuals seeking gain at the expense of the public policy purpose of the program. I am not suggesting the housing credit in particular is susceptible to that, but it is important for those who work with the program to be vigilant against potential abuse.