Posted on February 20, 2018
MHP released an analysis this week that makes the case for increasing the state’s low income housing tax credit program to partially make up for the loss of millions of federal dollars due to recent federal tax reform.
The Commonwealth is facing a “perfect storm” on the housing tax credit front. At the state level, the allocation for state low income housing tax credits has been set at $20 million for the last five years but is scheduled to revert to $10 million unless the state legislature reauthorizes the program at its current level of $20 million as proposed by the Baker-Polito Administration.
At the federal level, passage of tax reform and the slashing of the top corporate tax rate from 35 to 21 percent is expected to reduce equity investment in housing tax credits by 16 percent or about $1.7 billion annually across the U.S.
At a public hearing on the state’s housing bond bill (H. 4134) on Feb. 13, MHP Executive Director Clark Ziegler told members of the Senate Committee on Bonding that, based on MHP’s analysis, allowing the state’s allocation of housing tax credits to revert to $10 million – combined with an estimated loss of $64.5 million in federal tax credit equity – would result in an aggregate loss of over $100 million in equity, nearly 1,000 construction jobs and 800 units of affordable housing. Ziegler asked the committee to continue the allocation of state tax credits at $20 million or increase it to $25 million if possible.
Even if the state legislature were to authorize an increase of the state tax credit to $25 million, MHP estimates that the Commonwealth would have to manage a 10 percent reduction in private tax credit equity and would be able to fund fewer projects, resulting in about 450 less construction jobs and 435 less affordable housing units.
Federal tax credit equity is just one of the many resources that support affordable housing in Massachusetts. State-authorized bond funding, tax credits and other programs also provide substantial funding for affordable housing. Even if these state resources remain at current levels, and the legislature were to vote to keep the state housing tax credit allocation at $20 million, the loss in federal credit equity alone would result in an annual loss of 550 fewer construction jobs and 600 fewer affordable housing units, according to MHP’s analysis, done by Senior Lending Analyst Anne Lewis.
“The need for affordable housing in Massachusetts is as critical as ever,” Ziegler testified. “The combination of a strong state economy, high housing demand and low housing production has created one of the largest housing affordability gaps in the U.S. More than 180,000 extremely low income individuals and families in Massachusetts now pay more than half of their income on rent. Private housing production alone will not solve that problem. The programs authorized in the housing bond bill are one of the few ways we can close this gap.”
For more information on this analysis, contact Anne Lewis at alewis@mhp.net.