Throughout the fall, Democrats and Republicans rightly made inflation a core campaign issue, often citing gas prices and groceries as the central drivers of rising costs. The reality, of course, is that housing costs—rent, mortgage payments, upkeep, and utilities—constitute the single-largest factor of inflation, making up a full third of the consumer price index. And, despite all the promises made by plenty on Capitol Hill, until we can get a handle on the price for a decent place to live, reducing the hurt for working families, seniors, veterans, and many other struggling Americans is going to be nearly impossible.
Now, with the din of the 2022 campaign is behind us, Congress has only weeks to keep the government funded and prevent future fiscal crises. But the single-most powerful domestic policy lever this lame duck Congress can pull would be to restore cutbacks and increase resources for the low-income housing tax credit (LIHTC), which has preserved or created 3.6 million affordable rental homes serving over 8 million households across this country since its inception 36 years ago.
By now the refrain is familiar: We’re running a deficit of up to 7 million affordable rental homes nationwide. Rents and costs are on the rise—46% of renters pay more than 30% of their income on housing, the benchmark for affordability, and nearly a quarter of renters pay more than half their wages on rent. The LIHTC was designed to correct the marketplace without distorting it. The program channels tax incentives to states, which in turn provide those credits to finance the construction and preservation of homes that are affordable for at least 30 years, including areas that are difficult to develop or where incomes are low and costs to develop are high.
As anyone scanning the headlines can tell you, the costs of home development are on the rise everywhere—in cities, suburban areas, and rural communities. The organization I chair, Enterprise Community Partners, is one of the largest affordable housing developers and asset managers in the country. The most critical stressors on our development pipeline right now are construction delays and higher-than-expected costs. And it’s not just us. An independent study showed nearly every project that received LIHTC support since 2019 has faced significant financing gaps, as construction costs and interest rates have climbed.
At the end of 2021, Congress let a small but meaningful increase in the LIHTC lapse. Enterprise, along with over 2,500 businesses, nonprofits, and public agencies are now calling on Congress not just to restore that cut but increase the credit by 50%. We’re also urging lawmakers to change an arbitrary threshold requiring many deals to receive half of their financing from private-activity bonds that has tied the hands of many states and would-be affordable housing developers. Taken together, these changes would yield an estimated 1.93 million additional affordable rental homes over the next decade.
Why take this up now?
Congress is working to keep the government funded through the end of the year, and Democrats and Republicans are jockeying for their respective tax priorities to hitch a ride on the final spending bill. The LIHTC program is a bipartisan no-brainer. It is a smart, historically successful investment, which places the responsibility and risk on the private sector; it’s also a critical investment in the families and working Americans who’ve been through extraordinary financial pain in recent years.
The window of opportunity is fast closing. The new Congress will be overwhelmed with priorities and political infighting, while a razor-thin majority will keep Republicans on edge. In a divisive political climate, injecting needed resources into affordable housing is an unalloyed political win for members on both sides of the aisle.
Indeed, across the country voters resoundingly endorsed dozens of state- and local-level ballot measures to increase affordable housing in their communities—resources that will be paired with the housing credit to maximize the production of homes. Affordable housing isn’t just crucial to our economy—it’s commonsense, consensus policy. That’s why you see a bipartisan coalition of politicians rallying behind these crucial tax credits, including Sens. Maria Cantwell (D-Wash.), Todd Young (R-Ind.), Rob Portman (R-Ohio), and Ron Wyden (D-Ore.).
To be sure, we can’t just rely on federal tax credits to solve the affordable housing crisis in this country. But with evictions and displacement set to take off as the country’s economy continues to falter with high inflation and interest rates, there is no better investment in the future of our communities and our economy than building and preserving more affordable homes. It’s time for Congress to get in on the act.
