A group of powerful mortgage industry experts sent out this letter to the House of Representatives Wednesday, demanding that Congress include affordable housing measures in its tax reform.
The Senate recently passed a bill to completely overhaul the current tax system. Now, the House and the Senate will have to come to come to an agreement about which tax bill to send to the president's desk.
The House passed its tax reform bill back in the middle of November. President Donald Trump said he wants something on his desk to sign before Christmas.
But first, these housing industry experts want to make sure affordable housing does not suffer in the new tax reform bill.
"This is a critical moment for affordable housing,” said J. Ronald Terwilliger, Trammell Crow Residential chairman emeritus. “As Congress completes its work on tax reform, it must support and strengthen the current programs that help meet our nation's growing need for affordable rental homes.”
“That means preserving the Low-Income Housing Tax Credit, offsetting the impact of a lower corporate tax rate on Housing Credit investment, and maintaining the tax exemption for private activity bonds,” Terwilliger said. “Without these tools, hundreds of thousands of affordable rental homes would not be built or preserved. With millions of low-income families lacking access to affordable housing and suffering under crushing rent burdens, the stakes could not be higher.”
The letter, signed by Terwilliger and 12 other experts, was addressed to Kevin Brady, chairman of the House Ways and Means Committee, and sent to all House members – both Republican and Democrat – who were appointed to the tax reform conference committee.
The letter made three demands, saying that at a minimum, the final tax reform package must:
- Preserve the Low-Income Housing Tax Credit
- Preserve the tax exemption for private activity bonds
- Offset the impact of a lower corporate tax rate on Housing Credit investment
“With a 30-year track record, the Housing Credit is the nation’s most successful supply-side affordable housing program and the only one of any consequence,” the letter stated. “Since 1986, it has encouraged approximately $100 billion in private investment in the preservation and construction of more than three million affordable rental homes. We are pleased that both the House and Senate tax reform bills preserve the Housing Credit, a position that must be maintained by the conference committee.”
The letter explained that while the Senate bill preserves the tax exemption for private activity bonds, the House version of reform does not. It called on the committee to side with the Senate’s version in this respect.
As for the final demand, the experts stated in the letter that neither the House or Senate version took into account the impact of the lower corporate tax rate on Housing Credit investment.
“With a significantly lower rate, Housing Credit pricing will have to drop to maintain current market yields,” the letter stated. “Without offsetting adjustments, lower pricing will reduce the amount of private equity available to build and preserve affordable rental homes. In response, the conference committee should at least increase Housing Credit authority by 50%, as proposed in the bipartisan Affordable Housing Credit Improvement Act of 2017.”
The letter is signed by Terwilliger along with:
- Daryl Carter, Avanath Captial Management chairman and CEO
- Lawrence Curtis, WinnDevelopment president
- John Eudy, Essex Property Trust executive vice president of development and chief investment officer
- Jeff Foster, GGLO principal and director of affordable housing
- Clyde Holland, Holland Partner Group CEO and chairman
- Joy Horak-Brown, New Hope Housing president and CEO
- Barry Mandel, Mandel Group president
- Linda Mandolini, Eden Housing president
- Ricardo Rivas, Allied Orion Group principal and chief investment officer
- Jonathan Rose, Jonathan Rose Companies president
- Jill Sherman, Gerding Edlen partner
- Stephen Whyte, VITUS managing director
But these aren’t the only ones calling on Congress to look at affordable housing in its tax bill. In a seemingly unprecedented move, a huge coalition featuring thousands of organizations, state and local governments, and elected officials joined together to call on Congress to use the savings derived from any changes to the mortgage interest deduction via the new tax reform bill to fund low-income housing.