There’s been no shortage of news about increasing home prices and low housing inventory around the country, but one thing there definitely has been a shortage of is affordable housing. And according to industry experts, that shortage could get even worse under the new GOP tax plan.
The proposed tax reform bill, called the Tax Cuts and Jobs Act, holds in place the Low Income Housing Tax Credit but, as Realtor.com explains, it would be rendered ineffective, as half of low-income housing development is done with private activity bonds, which are eliminated under the new plan.
The other half relies on tax credits, which, under the new plan, would become more expensive due to decreasing rates that will make them worth less.
Michael Novogradac, who runs an accounting consultancy that tracks the tax credits, told Realtor.com that he estimates that affordable housing units would be reduced by two-thirds each year for the next decade as a result. Meanwhile, the National Low Income Housing Coalition said the reform would result in a loss of more than 80,000 affordable homes per year, Realtor.com reported.
It’s even more shocking when one considers the fact that every county in the U.S. is facing an affordable housing crisis, according to a 2017 report from the Urban Institute. The study says there are only 21 adequate, affordable and available units for every 100 renter households with income at or below 30 percent of the area’s median income. That number, according to Urban Institute, has decreased sharply since 2009, when there were 43 such units per 100. The situation is especially dire in large, urban counties, where low-income renters have less than a 20 percent chance of finding an affordable unit.
The Mortgage Bankers Association also voiced concerns about how the Tax Cuts and Jobs Act would impact affordable housing in the country.
“In particular, we believe that the proposed changes to the mortgage interest deduction, deductibility of state and local real estate taxes and the exemption for capital gains treatment when families sell their principal residence would have a negative impact on the housing market and potentially the national economy as a whole,” the organization said in a statement. “We are also concerned about the potential impact of certain provisions on the production of affordable housing, which is vital.”