PHOTO: Kyle T. Webster
I was more than fortunate on several occasions to sit next to Sen. Ted Kennedy on the shuttle from Boston to Washington, D.C. He was a great friend to affordable housing and was one of the few in Congress back then who knew the housing credit and how it worked. The industry misses him terribly.
Sen. Kennedy had a funny saying, one I never quite understood, but there was an encouraging message in it somewhere. On the rare occasion we finished our first round of drinks and ordered a second, he would say, “One will get you to D.C.; two will get you all the way to Baltimore.” I think I know what he meant by that now.
As the modifications to the housing credit contained in House Ways and Means Committee chairman Dave Camp’s discussion draft made the rounds this winter, many of you might have wondered what the proposals actually meant. Sen. Kennedy might have echoed Speaker Boehner’s response, which was, “Blah, blah, blah.” I doubt he’d ever be quite that gruff, but you never know. The fact is, the discussion-draft changes would erode many of the fundamental strengths of the program in an environment where we need more, not less, housing.
The Camp proposals include:
¦ Repealing the 4 percent credit.
¦ Repealing the increased basis rule for high-cost and difficult development areas.
¦ Directing housing finance agencies to allocate qualified basis rather than credit amounts. The annual amount of allocable basis for each state would be equal to $31.20 multiplied by the state’s population, with a minimum annual amount of $36.3 million.
¦ Extending the credit period from 10 to 15 years to match the compliance time.
Now that we’ve seen these “modifications,” we can learn and take direction from both the proposed policy changes and the process that created these concepts. Without input on a final draft from housing professionals like ourselves (which is due more to the nature of rewriting the tax code than our availability to help), this is what you get—a layman’s view of creating housing within the context of reducing corporate rates.
This is an attempt to strengthen and expand production, and we all know we can do better than this. So let’s do it. We should get more serious in promoting proposals that we know work, but, first, we should get very serious about an opportunity we have right now, this spring.
In the past few years, a laundry list of changes has been born out of market reactions, or as a response to a growing issue, or simply as a good idea. It’s not easy to improve the highest-performing real estate asset class in the U.S., but folks have tried.
We’ve seen income-averaging proposals, or the 80/40 idea, which captures those “just over-income” populations. The idea to fix the 4 percent credit and allow 130 percent boosts for bond deals has been around for a long time, which would certainly help mixed-income and preservation deals work much better.
Of course, our current fight to fix the 9 percent credit floor and get a 2014 extension is an ongoing battle, which we may win this year if the call for extenders action stirs the Ways and Means Committee into moving forward.
Now, we can react and move forward on something we might never see again. The debate over how to reform our nation’s housing finance market will take place this spring in Congress. For those of you who want to get serious about promoting affordable housing and ensuring that we don’t see another discussion draft created without external input, now is the time to call both of your senators.
The Senate Banking Committee is working on a bill as we speak, and we have the opportunity to create affordable housing funding within its framework. Each of you in development, management, finance, or community development who is reading these words should mobilize and make your voice strongly heard.
Ask them to support dedicated funding for affordable housing in housing finance reform legislation, even if you have to call twice. Two will get you all the way to Baltimore, and you know what that means—go for it.
Bob Moss is a principal and national director of governmental affairs at CohnReznick.