Mack Proposes Increase in State Ceiling on Low-Income Housing Credit
S5155-S5156
- AuthorsMack, Sen. ConnieGraham, Sen. BobChafee, Sen. John H.Bryan, Sen. Richard H.Murkowski, Sen. Frank H.Breaux, Sen. John B.Jeffords, Sen. James M.Kerrey, Sen. J. RobertRobb, Sen. Charles S.Conrad, Sen. KentRockefeller, Sen. John D., IVDaschle, Sen. Tom
- Institutional AuthorsSenate
- Cross-ReferenceFor text of S. 1017, see Doc 1999-18605 (3 original pages).
- Code Sections
- Subject Area/Tax Topics
- Index Termslegislation, taxlow-income housing, credit
- Industry GroupsReal estate
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 1999-18549 (2 original pages)
- Tax Analysts Electronic Citation1999 TNT 102-61
Affordable Housing Opportunity Act of 1999
=============== SUMMARY ===============
Finance Committee member Connie Mack, R-Fla., introduced S. 1017, the Affordable Housing Opportunity Act, to increase the state ceiling on the low-income housing credit; 42 senators are original cosponsors of the bill, including Senate Minority Leader Tom Daschle, D-S.D., and Finance Committee members Bob Graham, D-Fla., John H. Chafee, R-R.I., Richard H. Bryan, D-Nev., Frank H. Murkowski, R-Alaska, John B. Breaux, D-La., James M. Jeffords, R-Vt., J. Robert Kerrey, D-Neb., Charles S. Robb, D-Va., Kent Conrad, D-N.D., and John D. Rockefeller IV, D-W.Va.
"Despite the success of the Housing Credit in meeting affordable rental housing needs," Mack told the Senate, "the apartments it helps finance can barely keep pace with the nearly 100,000 low cost apartments which are demolished, abandoned, or converted to market rents each year" because the credit has remained at $1.25 per resident of each state since its creation in 1986. Mack said his bill would raise the credit to $1.75 and index the amount for future inflation, which would "increase the stock of critically needed low income apartments by 27,000 each year." Text of S. 1017 appears in the Record.
=============== FULL TEXT ===============
S. 1017. A bill to amend the Internal Revenue Code of 1986 to increase the State ceiling on the low-income housing credit; to the Committee on Finance.
AFFORDABLE HOUSING OPPORTUNITY ACT OF 1999
Mr. MACK. Mr. President, I rise today to introduce the Affordable Housing Opportunity Act of 1999. My colleague from my home state, Bob Graham, my colleague from Pennsylvania, Senator Santorum, and 42 other members of the Senate join me as original cosponsors of this effort to make sure that the Low Income Housing Tax Credit is not undercut by the effects of inflation.
The Low Income Housing Tax Credit is one federal housing program that works. It works to produce affordable rental housing by allowing states to distribute tax credits to those who invest in apartments for low income families. It works because it is decentralized, it is market-oriented, and it relies on the private sector.
The Low Income Housing Tax Credit works because it is based on sound economics. This is in stark contrast to the alternative government approach to the problem of a scarcity of privately owned, affordable housing units, the approach of rent control. Under rent control, owners are restricted in the price they can charge for their apartments. Since this dramatically reduces the return on their investment in housing, potential owners of rental units take their money elsewhere. The result, confirmed in a study of rent control in California in the early 1990s, is that rent control actually reduces the number of rental units available for low income families.
There is a better way. The Low Income Housing Tax Credit is that way. Under this program, tax credits are allocated by states and their localities to investors in low income housing. In return for agreeing to charge low rents for the units produced, the investors receive a tax credit that makes up for the financial risk of the investment. Instead of mandating low rents, the program provides an incentive for property owners to charge low rents.
And, as Adam Smith would have predicted, this incentive does the job. Since 1987, state agencies have allocated over $3 billion in Housing Credits to help finance nearly one million apartments for low income families, including 70,000 apartments in 1997. In my own state of Florida, the Credit is responsible for helping finance over 52,000 apartments for low income families, including 3,300 apartments in 1997. The demand for Housing Credits nationwide currently outstrips supply by more than three to one.
Despite the success of the Housing Credit in meeting affordable rental housing needs, the apartments it helps finance can barely keep pace with the nearly 100,000 low cost apartments which are demolished, abandoned, or converted to market rents each year. This is because the credit has been set at an annual amount of $1.25 per resident of each state, since its creation in 1986. To make up for the loss in value of the credit due to inflation, we propose to increase this amount to $1.75 per resident and to index the amount for future inflation. It has been estimated that this will increase the stock of critically needed low income apartments by 27,000 each year.
There has long existed in this body a dedication to affordable housing, an interest that knows no party lines. One of the major, early proponents of federally supported affordable housing was Senator Robert A. Taft of Ohio, known in his day as Mr. Republican, whose monument chimes regularly just a few hundred yards from here. With this strong, bipartisan pedigree, I have no hesitation in asking my colleagues on both sides of the aisle to join me to enact this proposal -- which is similar to one contained in the President's budget and is supported by the nation's governors and mayors and the affordable housing community -- to ensure the continued vitality of a program that works.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the Record, as follows:
S. 1017
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the "Affordable Housing Opportunity Act of 1999".
SEC. 2. INCREASE IN STATE CEILING ON LOW-INCOME HOUSING CREDIT.
(a) In General. -- Clause (i) of section 42(h)(3)(C) of the Internal Revenue Code of 1986 (relating to State housing credit ceiling) is amended by striking "$1.25" and inserting "$1.75".
(b) Adjustment of State Ceiling for Increases in Cost-of-Living. -- Paragraph (3) of section 42(h) of such Code (relating to housing credit dollar amount for agencies) is amended by adding at the end the following new subparagraph:
"(H) Cost-of-living adjustment. --
"(i) In general. -- In the case of a calendar year after 2000, the dollar amount contained in subparagraph (C)(i) shall be increased by an amount equal to --
"(I) such dollar amount, multiplied by
"(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting 'calendar year 1999' for 'calendar year 1992' in subparagraph (B) thereof.
"(ii) Rounding. -- If any increase under clause (i) is not a multiple of 5 cents, such increase shall be rounded to the next lowest multiple of 5 cents.".
(c) Effective Date. -- The amendments made by this section shall apply to calendar years after 1999.
Mr. GRAHAM. Mr. President, I rise today with my good friend and colleague, Senator Mack to introduce the Affordable Housing Opportunity Act of 1999. This legislation would raise the annual limit on state authority to allocate low-income housing tax credits from $1.25 to $1.75 per capita, and to index the cap to inflation.
Since its creation in the Tax Reform Act of 1986, the low income housing tax credit program has been a tremendous success that has generated nearly a million units of housing for low and moderate income families. In my home state of Florida the tax credit has produced over 52,000 affordable rental units, valued at over $2.2 billion, including 3,300 apartments in 1997.
This housing tax credit is a valuable incentive for developers to build and rehabilitate low-income housing. It encourages the construction and renovation of low income housing by reducing the tax liability placed on developers of affordable homes. The credit is based on the costs of development as well as the percentage of units devoted to low-income families.
The low income housing tax credit not only helps developers but also benefits families. Those families that get up and go to work every day to earn their rent and mortgage payments, the low income housing tax credit provides families with an important stake in maintaining self-sufficiency. By supporting this credit we make the American dream more available to all Americans.
This credit has succeeded as a catalyst in bringing new sources of funding to low income housing development. This is particularly important at a time when decreasing appropriations for federally- assisted housing and the elimination of other tax incentives for rental housing production have only grown. While this success is gratifying, we should not take for granted the continued growth of this program.
Under the current formula used to fund this program, each state is located $1.25 multiplied by the State's population. Unlike other provisions of the Tax Code, this formula has not been adjusted since the credit was created in 1986. During the same period, inflation has eroded the credit's purchasing power by nearly 45 percent, as measured by the Consumer Price Index. This cap is strangling state capacity to meet the pressing low income housing needs.
By increasing the cap on this credit to $1.75, we will free the 12 year cap on housing credit from it current limitations, as requested by our Nation's governors, and we will liberate states' capacity to help millions of Americans who still have no decent, safe, affordable place to live.
A brief look at the history of the housing credit provides ample evidence of why we need our legislation. Nationwide, demand for housing credits outstrips supply by a ratio of three to one. In 1998, states received applications requesting more than 1.2 billion in housing credits -- far surpassing the $365 million in the credit authority available to allocate that year. This trend coupled with the fact that every year nearly 100,000 low cost apartments are demolished, abandoned, or converted to market rate use makes clear the need for this legislation. Increasing the cap as I propose would allow states to finance approximately 27,000 more critically needed low income apartments each year using the housing credit.
In the last Congress, sixty seven Senators cosponsored this legislation, including nearly two-thirds of the Finance Committee, raising the low income housing tax credit to $1.75 and indexing it for inflation. Nearly 70 percent of the House Ways and Means Committee and a total of 299 House Members cosponsored legislation proposing the same increase.
That indicates just how much support this program has in the Congress. Also, the Administration, the nation's governors and mayors, other state and local government groups, and the affordable housing community strongly support this increase. I am confident with all this support that this measure will finally pass this year. I urge all my colleagues to embrace this important legislation.
- AuthorsMack, Sen. ConnieGraham, Sen. BobChafee, Sen. John H.Bryan, Sen. Richard H.Murkowski, Sen. Frank H.Breaux, Sen. John B.Jeffords, Sen. James M.Kerrey, Sen. J. RobertRobb, Sen. Charles S.Conrad, Sen. KentRockefeller, Sen. John D., IVDaschle, Sen. Tom
- Institutional AuthorsSenate
- Cross-ReferenceFor text of S. 1017, see Doc 1999-18605 (3 original pages).
- Code Sections
- Subject Area/Tax Topics
- Index Termslegislation, taxlow-income housing, credit
- Industry GroupsReal estate
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 1999-18549 (2 original pages)
- Tax Analysts Electronic Citation1999 TNT 102-61