In 2017, President-elect Donald Trump and the new Congress will most likely attempt a major overhaul of the federal tax code. A similar overhaul of the code by President Ronald Reagan and Congress in 1986 created a tax incentive that is viewed as one of the most effective federal housing programs ever. Known as the Low-Income Housing Tax Credit Program (housing credit), this tax incentive reduced the federal government’s long-term risk to fund housing.
Because its name is a misnomer, the Low-Income Housing Tax Credit Program is sometimes confused with less successful efforts. In actuality, the housing credit serves working and retired Pennsylvanians whose incomes do not exceed 60 percent of the area median income. Many families, veterans, people with special needs, seniors and first responders meet the income requirements of the program. Rents are made more affordable because the equity investment from the sale of the credit reduces any mortgage necessary. With a smaller mortgage, operating costs are reduced and the development is economically feasible.
Limerock Court, located in College Township, offers a prime example of an affordable housing development made possible through the housing credit. This conveniently located development offers 36 two and three-bedroom townhouse-style homes for individuals and families. Four of the homes are accessible to persons with disabilities, including one that is also adapted for audio and visually impaired residents. On-site case management and workshops addressing issues such as financial and budget counseling are coordinated by Interfaith Human Services.
While the location and adjacent bus stop offers easy access to amenities in downtown State College and surrounding areas, it’s the long-term plan for the development that make it truly unique. Limerock was developed with the idea of converting renters into homeowners. To accomplish that goal, at the conclusion of the initial 15-year compliance period, residents will be offered the option to purchase their homes.
Limerock Court is not an isolated example of the positive impact the housing credit continues to have on residents and communities. Throughout Pennsylvania the credit has spurred nonprofit and private developers to build or rehabilitate more than 84,000 affordable apartments serving more than 200,000 Pennsylvanians. These privately owned and managed developments reduce blight, help spur economic development and generate billions of dollars of local and state tax revenues. There is considerable empirical evidence that investment in affordable housing actually enhances the value of nearby housing and stabilizes communities.
The Pennsylvania Housing Finance Agency is the state entity that administers this federal credit in the commonwealth. Each year PHFA distributes about $30 million in credits. Those credits generate about a $300 million investment in housing. The competition by developers is intense with two out of three proposals being rejected each year. In most cases rejections are based solely on the limited amount of credits available, rather than the merits of the proposal or needs within the community.
Recognizing the success of the program, bipartisan legislation to increase the credit by 50 percent has been introduced by Senators Maria Cantwell, a Democrat from Washington state, and Orrin Hatch, a Republican from Utah. A similar bipartisan proposal is expected to be introduced in the House of Representatives in 2017. If approved, Pennsylvania’s credit authority would rise from $30 to $45 million a year. Such an increase would bring $150 million more investment capital to Pennsylvania each year and allow for the preservation or development of approximately 1,000 affordable workforce and senior apartments.
This expansion of the credit will have an immediate impact on the lives of many Pennsylvanians looking for more affordable housing options in 2017. In that regard, I will be calling on our new president and the commonwealth’s congressional delegation to work together to expand a program that has proven its value over the past 30 years. Calls or emails from concerned citizens to their congressional representatives can help us get this done and make a great housing program even better.
Brian A. Hudson Sr. is executive director and CEO of Pennsylvania Housing Finance Agency.