In a recent op-ed published in The Wall Street Journal (“Kill the Loopholes, Including the One for Low-Income Housing”), authors Chris Edwards and Vanessa Brown Calder argue that the low-income housing tax credit, the most successful tool we have to create affordable housing, should be eliminated. This idea would have detrimental impacts for millions of people nationwide.
As the leaders of the country’s largest affordable housing nonprofits, we know that the housing credit is a critical incentive for private investment in housing that is affordable. Over the last 30 years, virtually all affordable rental housing in this country has been built or rehabilitated with housing credit support.
The housing credit should be expanded, not “killed.” Currently more than one in four renters pays more than half of their income on housing costs, and waiting lists for affordable housing are already years long—many aren’t even open to new applicants, the backlog is so enormous. Without building more affordable housing with the housing credit, these problems will only grow worse. Moreover, Matthew Desmond, in his Pulitzer Prize-winning book Evicted, demonstrates that housing stability is the gateway to breaking the cycle of poverty.
As mission-driven nonprofits, we create and preserve housing for the benefit of the community and its residents. The long-term rent restrictions created by the housing credit benefit tenants who would otherwise be priced out of market-rate units and left rent burdened and often in poor quality housing. While it is true that private investors in affordable housing seek a return on their investment, these profits and fees have declined significantly over the years and developer fees are strictly controlled by state housing finance agencies.
There is a desperate need for affordable housing across the country. When Mercy Housing opened Vera Haile Senior Housing in San Francisco in 2014, nearly 5,000 applications were received for 90 homes in just two weeks. Earlier this year, Mercy Housing opened a new community in Seattle and received more than 2,000 applications for 108 homes. Volunteers of America serves lower-income families and seniors, but also returning veterans and those with disabilities, and they see similar demand. Seniors and families who apply to live in National Housing Trust’s affordable homes typically have to wait a year and a half before an apartment becomes available.
As developers, we know firsthand that creating affordable housing without subsidies is simply not possible. With over 21 million cost-burdened renter households and 11 million households paying more than 50% of their income in rent, the demand for affordable rental housing far outstrips the supply created by the housing credit. If the private market could produce affordable rental housing it would do so, but it has not. Rising land and construction costs and stagnant wages for many households create a significant gap between what renters can pay and what it costs to build or preserve housing.
The housing credit has been a successful public-private partnership that helps close that gap at a reasonable cost with little risk. Investors provide equity up front for the construction or repair of affordable housing, but they receive no tax benefit until the housing is occupied and risk losing the credit if the housing doesn’t remain affordable. This risk incents investors to audit and inspect properties regularly to protect their investments. State housing agencies provide another layer of oversight, minimizing the burden on federal regulators. Of the more than 3 million homes in 40,000 properties financed with the housing credit, only a few cases of fraud have surfaced and violators have been prosecuted swiftly. Like our colleagues, we support all efforts to investigate and vigorously prosecute any and all cases of abuse and fraud.
Zoning and local regulations can increase the cost of affordable housing, and we support efforts to reduce these local barriers. However, a national crisis cannot be solved solely with local solutions. Rising costs, stagnant wages, and historic cuts to federal affordable housing investments have trapped millions of Americans in a cycle of poverty. To eliminate a successful incentive for private investment in affordable housing would further devastate American communities nationwide.
Now is not the time to turn our backs on the millions of Americans in need of quality, affordable housing. We instead should embrace the opportunity to attract more private investment to affordable housing development by improving and expanding the housing credit.
Jane Graf is CEO and president of Mercy Housing.
Michael Bodaken is president of the National Housing Trust.
Patrick Sheridan is executive vice president for housing of Volunteers of America.
Terry Parker is director of property management of the Good Samaritan Society.
