SAN FRANCISCO, CA - Members of the LIHTC Working Group, in a May 8, 2013 letter to House Ways and Means Committee Chairman Dave Camp, highlighted the key benefits of the Low-Income Housing Tax Credit (LIHTC) program and the possible effects of corporate tax reform on equity raised from the LIHTC, as detailed in the recent report, “Affordable Rental Housing After Tax Reform: Calculating Corporate Tax Reform's Possible Effects on Equity Raised from Low-Income Housing Tax Credits.”
“Since the low-income housing tax credit was adopted on a bipartisan basis as part of the tax code it has helped build, renovate and/or preserve more than 2.5 million affordable housing rental units. As the Bipartisan Policy Center’s Housing Commission reported in February, approximately 25 percent of renter households pay more than 50 percent of their income for rent. This points to a significant need for more affordable housing, which the LIHTC can provide,” said Stacey Stewart, CPA, a partner in Novogradac & Company LLP’s Dover, Ohio office who leads the LIHTC Working Group’s efforts.
In its letter, the LIHTC Working Group describes the key benefits of the LIHTC program. In addition to creating affordable housing, the LIHTC creates jobs for about 95,000 people each year and generates approximately $7.1 billion in economic income each year.
Additionally, the group’s letter discusses how certain corporate tax reform proposals could affect the amount of equity that can be raised from the LIHTC. Citing analysis released last week by Novogradac & Company LLP in “Affordable Rental Housing After Tax Reform,” the group notes that if the amount of investor equity is held constant, lower top corporate tax rates lower LIHTC yields, therefore creating downward pressure on LIHTC investor equity pricing. Layering in the effect of extending depreciation periods would further exacerbate these reductions.
“Applying the report’s analysis to today’s LIHTC equity market suggests that lower corporate tax rates and extended depreciation periods could mean a loss of $220 million to nearly $1 billion dollars, or more, in equity used to finance affordable rental housing. A loss in annual equity raised of that size could lead to a reduction in the total number of affordable rental units built or rehabilitated each year to as high as 9,500 units, or more. In light of the LIHTC program’s significant benefits, including affordable housing creation and jobs generation, it’s important to consider how the LIHTC will be affected by these proposals,” said Michael J. Novogradac, CPA, managing partner in the firm’s San Francisco office and the LIHTC Working Group’s advisor on industry and governmental affairs.
For more details and a copy of the letter, please go to www.lihtcworkinggroup.com. The LIHTC Working Group was established by Novogradac & Company LLP in 2008 to provide a platform for LIHTC industry participants to work together to resolve technical and administrative LIHTC program issues.