A lot of noise has come out of Washington, D.C., during President Trump’s first 100 days, including the potential for tax reform and a corporate rate reduction, which are causing a hiccup in low-income housing tax credit (LIHTC) equity pricing, and the proposed cuts to the Department of Housing and Urban Development (HUD) budget.
Bob Moss, principal and national director of governmental affairs at CohnReznick, encouraged AHF Live Forum attendees to filter the noise and focus on the positive things happening across the nation for the industry.
“I think good noise is some of the things that are happening across the country—all of the developers here and all of the properties that you are putting together and making things happen in communities,” he said. “We have good noise in the House and Senate bills to increase the LIHTC. We have good noise around the co-sponsorship efforts on Capitol Hill … And there’s also good noise that whatever happens in Washington, there will always be checks and balances to make sure that things go accordingly.”
During the Post-Election Washington Update panel last month in New Orleans, speakers filtered the noise on President Trump’s outline to overhaul the tax code.
The president’s one-page 2017 Tax Reform for Economic Growth and American Jobs proposal, released on April 26, calls for the top tax rate for businesses to be lowered to 15%.
David Gasson, executive director of Housing Advisory Group and vice president at Boston Capital, said Trump’s outline gets the White House to the table on tax negotiations.
“The White House is now in play. They are there with the House, and eventually when the Senate decides to enter the fray, they will be at the table as well, and that’s how tax reform happens. All three have to be at the table in order to have reform,” he said. “Do not pay attention to a 15% corporate rate. It is mathematically impossible to take corporate rates down to 15%. The economy couldn’t handle it; business wouldn’t handle it.”
Gasson cited the lowest that former House Ways and Means chairman Dave Camp was able to get to by eliminating every preference in the code was 25% in his tax reform blueprint.
“It’s just what the president was talking about during the campaign. He stuck to it and got it out in his first 100 days, and now they are at the table,” he said. “The 15% is not real.”
Emily Cadik, director of public policy for Enterprise Community Partners, agreed. “It was already difficult to see how the House plan would advance through Congress, and what the president put out yesterday is even more difficult and probably impossible.”
She said there are two ways that tax reform can happen. One is that the administration and Republicans would bring in Democrats. Democrats are saying they want to work with the administration on tax reform, but first they want the president to show them his tax returns. The other option is on a partisan basis, and the only way that happens is through budget reconciliation, which allows the Senate to bypass the filibuster 60-vote threshold on federal budget issues. However, Republicans would have to pass a budget framework first, which has been increasingly difficult in recent years.
Cadik said she believes that instead the nation could see a lighter reduction in the corporate tax rate. “One advantage Congress has is unlike the commitment to repeal and replace the Affordable Care Act, there are a lot of things that can be called tax reform, including tax cuts or other things that get tacked on to the bill,” she said. “Tax cuts are at least one place where they probably can get something through, but it’s not going to look anything like what’s coming out of the House or the White House.”
Gasson added, “Don’t listen to the noise. Real policy people who understand the code and understand economics and understand what’s doable are working together to put together a program that they think by the end of the year can be tax reform, no matter what it ends up being. We are very much in play with that conversation, and we know that we have partners in the White House as well as the House side and the Senate.”
Although there is a lot of uncertainty around what may happen to the LIHTC, speakers said it has been a rewarding time to be working in advocacy around the program.
Cadik, who coordinates outreach for the Affordable Rental Housing ACTION (A Call to Invest in Our Neighborhoods) Campaign, an industrywide group working to expand the LIHTC, said the best thing affordable housing developers can do is get legislators out to communities in their districts.
She said there is a difference between those who intellectually know the LIHTC program and those who really feel it deeply and personally after visiting a development and meeting with residents.
“I don’t think there’s been a time when the tax credit has been in a stronger position in Washington. We have incredible bipartisan support on both sides of the Hill,” added Gasson. “The only reason we have the support is because of getting members out to the properties and making them true believers. Seeing is believing. We have to keep doing that and getting members out to see properties. That’s what makes a difference. When they see the program, they believe it.”
Also of concern for the affordable housing industry is the president’s proposed fiscal year 2018 budget, which calls for substantial cuts at HUD, including the elimination of the Community Development Block Grant and HOME programs.
“What we saw in the skinny budget is not going to happen, but it’s going to be a tough year,” said Cadik. “CDBG and HOME were proposed to be eliminated, but probably won’t get zeroed out. CDBG is very popular, and thousands of mayors are going to descend on Washington, D.C., to share that. The HOME program is also key.”
Cadik said obviously the priorities regarding the HUD budget are programs tied to roofs over people’s heads.
“You don’t want to take away assistance from people,” she said. “But that makes it tough for programs like HOME and CDBG. We need to make the case that we need both sides of the coin—those that continue to house people and those that help create new affordable housing.”
Moss and Gasson also urged developers using appropriated housing programs to get members of Congress out to their properties as well.
“That’s the secret sauce, and that’s going to help,” said Moss. “That needs to start right now as well.”
Gasson added, “We’ve been talking to associations focused on the appropriated side on housing production to put together an effort like we did to mobilize members of Congress to get them out into the states. If they’re not on appropriation committees, they wouldn’t have any idea unless we get them there. That’s when they become advocates when they meet residents."