The Prospect of Lower Corporate Taxes Already Slowing Affordable Housing Investment

Across the country, affordable housing projects depend on tax credits to encourage investment; the possibility of a lower tax rate has already affected their funding.

1 minute read

January 28, 2017, 5:00 AM PST

By Casey Brazeal @northandclark

"Trump hasn’t yet acted on his plan to slash the business tax rate from 35 percent to 15 percent, but the campaign pledge alone is already reshaping how affordable housing developers fund their work," according to Josh Cohen in Next City. Much of the funding for affordable housing comes from Low-Income Housing Tax Credit (LIHTC), which incentivizes businesses to invest in affordable housing in order to get a lower corporate tax rate. These investments fund projects around the country. "For example, of the $23 million that Capitol Hill Housing spent on a recently built 88-unit rent-restricted apartment building, $5.6 million came from LIHTCs," Cohen writes.

If corporate taxes are slashed by more than half, there will be less incentive to invest in these projects. "With a significantly lower tax burden dangling on the horizon thanks to Trump, would-be investors have less incentive to pay top dollar for LIHTCs; developers have already dropped their “asking price” by 10 cents or more per tax credit to compensate," Cohen writes. According to National Low Income Housing Coalition President Diane Yentel, the effects of these proposed tax cuts can already be felt. "Either causing investors to hold off on investments altogether, or to provide less equity per dollar of the credit. In either case, it means less money available for the development of affordable housing," she tells Cohen.

Thursday, January 26, 2017 in Next City

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