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Susan Gittelman
Federal low-income housing tax credits have been a success. In their 30 years of existence, fostering investment in building homes, they have helped create 3 million units of increasingly needed housing. The program has put roofs over the heads of 10 million low- and moderate-income households.
But the need is even broader in many areas of the country, especially in desirable urban places like Boston, where the expense of housing has now exceeded the reach of middle-income families. Average folks are being priced out.
There is a movement afoot to significantly expand the federal low income credit.
And there is also something new. Some housing and policymakers are assembling a plan to create a new federal housing credit to complement the existing one. It would encourage an increase in the supply of housing for people making about 60 to 100 percent of the area median income in their regions.
Why 60 to 100 percent? Because by federal statute 60 percent of an area’s median is the upper limit for income eligibility for residents of properties using the low-income housing credit. Yet the reality is that families making somewhat more than that – and in many popular cities like Boston, even those making average incomes – are shut out of the expensive housing market. Their incomes have not kept pace with rising rents and home prices.
In Boston, an average income for a family is about $60,000. The conventional standard for the amount a family should spend on rent is at most a third of its income. That would be about $1,800 a month – and it’s challenging to find an apartment for $1,800 a month in Boston today.
Since housing tax credits were created by Congress in 1986, they have been allocated to each state, based on its population, which the states in turn award to applicants that they believe have the best proposals for building new or rehabilitating existing buildings. This allows states to control over what kind of housing is built and where.
Sen. Ron Wyden (D-Oregon) last month introduced the Middle Income Housing Tax Credit legislation in Congress. It would provide a new tool to help states address what they see as the need for workforce housing, to retain middle-class residences in high-cost places such as Boston and Portland, Oregon.
Each state would get a dollar of tax credit for every citizen. The program would generate about $230 million nationwide in the first year. Massachusetts would get about $5 million to make it more possible for developers to build middle-income housing, as banks or other companies would receive a tax credit for investing in the new housing projects.
The proposal was specifically designed as a complement to legislation that increases funding for low-income tax credits by 50 percent. It recognizes that the need for more housing for low-income families hasn’t gone away and in fact is still growing.
As we all know, Boston is booming, but it is largely luxury housing – with a limited amount of subsidized housing, as resources allow – that is being produced.
“We can’t continue to have success stories like Boston if we don’t address the need for housing at every level,” said David Gasson, vice president at Boston Capital Corp. Gasson is also executive director of the Housing Advisory Group, which is dedicated to protecting and improving affordable housing programs.
A Creative Solution
The low-income housing tax credit program costs the federal government about $6.4 billion a year (and the plan to increase it would add about $3 billion to that). Adding a middle-income housing tax credit program, as proposed, would cost roughly an additional $2.5 billion to $3 billion a year.
To put this into a cost perspective, the existing and popular home-mortgage housing tax deduction program, which by and large assists those at higher incomes, costs about $100 billion a year.
Investment in federal housing tax credits has a proven track record. Across the nation, as the percentage of families who are renters is at an all-time high and continues to grow, this could not be more timely.
Larry Curtis, president of WinnDevelopment, which specializes in building affordable housing, chaired an affordable-housing committee of the National Multifamily Housing Council. That committee helped fashion the idea of a federal tax credit that would encourage construction of homes that middle-income families can afford. “This is as serious an issue and opportunity as I’ve seen in my career,” said Curtis.
Wyden and others are seeking comments on this legislation now. Over the coming months it will continue to be refined, with the goal of linking it to the expansion of the low-income credit and building political support.
A middle-income housing tax credit program is a creative solution at a relatively modest cost. Given its potential, it’s worth a try.
Susan Gittelman is the executive director of B’nai B’rith Housing, a nonprofit, affordable housing developer currently working in Boston, Sudbury and Swampscott.
