"There is no question the new tax law made San Diego’s homeless and housing crisis harder to solve. "
[Editors note: this Op-Ed was originally published in the San Diego Union-Tribune and is reprinted here with permission]
While the congressional action to adopt the 2017 tax law was pretty partisan, there is bipartisan recognition that it inadvertently — but dangerously — weakened the major financing tool used to create tens of thousands of apartments with below-market rents for homeless people, seniors and low-wage working families, called the Low Income Housing Tax Credit.
For the San Diego region, it could mean the loss of as many as 5,000 affordable apartments in the next 10 years. With San Diego’s homelessness crisis top of mind with voters, and generating headlines every day, there is a cross-party agreement that we can’t afford to weaken tools we rely on to build a better tomorrow.
There is no question the new tax law made San Diego’s homeless and housing crisis harder to solve. The question is, will congressional leaders fix the housing credit, and will San Diego take local action to help fix the deepest needs of our growing housing crisis?
The housing credit was created in the Tax Reform Act of 1986 with bipartisan support. The housing credit program has helped create and rehabilitate 3 million affordable rental homes across the country. It offers corporate investors a way to reduce their taxes in exchange for providing equity to produce affordable rental housing for lower income households. In California, the housing credit has contributed to the production and preservation of more than 350,000 homes with another 50,000 in various stages of development.
In San Diego County, the housing credit has created more than 23,000 affordable rental homes and 14,000 jobs that generate $248 million annually in revenue for state and local governments. Community HousingWorks, a nonprofit affordable housing developer celebrating 30 years and the creation of more than 2,000 affordable apartments in the county, has helped make that happen.
The housing credit has been and will be an essential source of matching money for new affordable apartments that help homeless people move off San Diego’s streets and into apartments. At a time when there are three local city tax initiatives under discussion that propose to invest billions of local matching money in affordable apartment solutions for homeless people, the future power of the housing credit is a very real issue for San Diego.
The fact that the housing credit was one of the few tax credits saved in the 2017 tax bill demonstrated the broad support the program enjoys nationally. In the words of the Trump administration and the congressional committees that wrote the tax bill, the housing credit has “proven to be effective in promoting policy goals important in the American economy.”
Unfortunately, in the rush to pass the final tax bill, Congress ignored warnings that the tax bill’s lowering of corporate tax rates from 35 percent to 21 percent would also lead to the loss of roughly 15 percent of the value of the housing credit because the lower the expected tax burden, the less investors are willing to pay for this investment. The result? A projected loss of more than 260,000 affordable homes nationally and nearly 50,000 in California over a 10-year period.
If, for example, today’s tax credit pricing had been in place two years ago when the San Diego Housing Commission authorized a $7 million loan so Community HousingWorks could develop North Park Seniors — 76 apartments and San Diego’s first LGBT-affirming senior community — the loan would have ballooned to nearly $10 million. The commission would have been forced to increase its public loan to close the gap the investors reduced investment created. In other words, it would have cost the commission an additional $32,000 per apartment to finance the community, meaning it would have had less money to build other affordable housing developments.
Fortunately, Congress has legislation in hand with strong bipartisan support that would both fix these losses and make the housing credit an even more powerful tool for creating and preserving apartments for homeless and low-income people. This legislation, known as the Affordable Housing Credit Improvement Act of 2017 in the Senate, was briefly included in the most recent proposed 2018 federal budget bill. There is a corresponding bill in the House, co-sponsored by San Diego County’s own Rep. Darrell Issa, R-Vista. Sadly, the housing credit provisions were stripped out at the last minute.
We urge local leaders to join in asking our Congress members to tell House Majority Leader Kevin McCarthy, R-Bakersfield, and Rep. Devin Nunes, R-Tulare, that passing the Affordable Housing Credit Improvement Act of 2017 must be a priority before the November 2018 elections.
San Diego can’t effectively tackle homelessness with weaker tools. Our leaders at the federal, state and local levels must show urgency and resolve. Just about everyone wants to help end homelessness and our housing crisis, but our collective intentions won’t create meaningful change without a powerful housing credit and local matching money.
Reynolds is president & CEO of Community Housing Works and Schwartz is president & CEO of California Housing Partnership.