Support the news
The twists and turns of tax plans, from the House to the Senate to conference committee, have been a roller coaster ride for many Americans, as different versions were suggested, discarded or adopted.
But affordable housing advocate David Gasson is relieved — his area of expertise is likely to end up where it started.
“Advocates like me, we’re happy in that affordable housing was not devastated in the tax bill," he said, laughing.
Gasson is director of communications at the housing investment firm Boston Capital, and he sits on WBUR’s Executive Advisory Council.
An earlier version of the Republicans' tax bill could have slashed new affordable housing nearly in half, but the final version President Trump plans to sign keeps funding intact.
Gasson said the House bill would have ended a type of tax-exempt bond that affordable housing developers rely on.
"We absolutely dodged a big bullet, because if they had gone along with the House language and eliminated private activity bonds, it would have devastated affordable housing production in this country," he said. "Massachusetts, and across the board every state, would have felt the effect.”
The effect would have resulted in roughly 800,000 fewer new units over a decade.
That it didn't happen means housing advocates can breathe easy. But there's a downside.
First some background: The federal Low Income Housing Tax Credit program, known as LIHTC, is behind 90 percent of affordable rental units built across the country.
When Donald Trump was elected, the prospect of tax reform caused LIHTC credits to lose hundreds of millions of dollars in value, because the credits are tied to the corporate tax rate. The lower the expected tax burden, the less the credits are worth to investors.
Affordable housing developer Bart Mitchell said investors thought the corporate rate would be cut from 35 percent to 25 percent.
Instead, Republicans will set it at 21 percent.
Mitchell said this will cause the value of tax credits to fall even further from when Trump was elected.
“There was a big hit. There's going to be another small hit," he said.
In all, Mitchell said the bill will translate to more than 200,000 fewer units over a decade. In Massachusetts, this could mean thousands of units that don't get built.
But Mitchell also sees an upside in the bill — low income housing tax credits will be enshrined again in the tax code.
“It is a Republican administration, Republican Senate, Republican House of Representatives that have doubled down on a tax credit that was created when Reagan was president," he said.
So Congress is keeping the tools developers use to keep homes affordable. But a deep corporate tax cut means those tools will be less effective.
The next step, Mitchell says, is to push Congress to expand LIHTC and restore its lost value.
This segment aired on December 21, 2017.
Support the news