On the Block
A new tax proposal threatens low-income tax credits again. “It’s déjà vu all over again.” So said Yogi Berra, but you can be sure the Hall of Fame catcher wasn’t talking about affordable housing. But affordable housing advocates are concerned that history may repeat itself with the low-income housing tax credit.
Three years ago, the low-income tax credit (or LIHTC) was on the chopping block as an unintended casualty of the president’s dividend tax plan. This time, the President’s Advisory Panel on Tax Reform has low-income housing advocates on guard again. The panel’s goal is to eliminate the alternative minimum tax. To afford this, it has recommended eliminating all tax preferences, including the LIHTC. Outside of the Hope VI program, which has funding battles of its own, the LIHTC is the only production stimulus for affordable housing.
The question now is how seriously to take this threat. David A. Smith, president of Recapitalization Advisors, an affordable housing consulting firm in Boston, remembers 1986 when no one took the Tax Reform Act seriously–only to have the legislation come back and turn the industry upside down. “We’re going to be in an election year, and the repeal of the alternative minimum tax is going to very popular,” Smith says. “To repeal it will be costly. We have to find somewhere to pay for that–whether it’s through the mortgage interest deduction or changing the tax credits. I think it does need to be taken seriously.”
But other affordable housing advocates think this isn’t the time for a tax code change. “There will become an environment when, politically, the restructuring of the tax code happens,” says Patrick Clancy, president and CEO of The Community Builders in Boston, which is one of the largest developers of affordable housing in the country. “But it certainly won’t happen in this lame duck administration.”
–Les Shaver