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What is the Future of Affordable Housing Production Under Trump’s Budget Proposal?

The prospects of affordable housing development may be in for some major cuts in the Trump administration.

Trump’s Promises and Proposals

Within the recently released federal budget proposal by the Office of Management and Budget (OMB), the Department of Housing and Urban Development (HUD) faces an over $6 billion, or 13%, budget reduction in fiscal year 2018. Further, it seems like the administration is shifting to tax reform as its next major initiative after the failure to pass the American Health Care Act last week. If it follows the promises made during the campaign, the reforms could see United States businesses paying as little as 15% in corporate taxes. Tax reforms could have large implications for the Low Income Housing Tax Credit, and the near future of affordable housing development.

Will HOME Funding Vanish?

With the proposed budget cuts to HUD, HOME funds are in danger of being completely zeroed out in fiscal year 2018. The HOME Investment Partnerships Program (HOME) is a HUD program that works to provide affordable housing to low and very-low income Americans. HOME funds are often used to finance affordable housing building construction and rehabilitation, site acquisition, and Community Housing Development Organizations (CHDOs), nonprofit organizations committed to developing affordable housing within the communities in which they operate.

The City of Bloomington uses HOME funds to provide decent, affordable housing to lower-income housing and to expand the capacity of nonprofit housing providers. Recent projects assisted with the city’s HOME funds have included development of Crawford Apartments at 2440 S. Henderson, and the condominium property at 3090 E. Covenanter Dr., among several others, according to HUD data. In the City’s 2015-2019 Consolidated Plan, the City anticipates receiving $400,000 per year in HOME funding. These budget cuts threaten the city’s ability to support affordable housing projects as well as SCIHO’s ability to produce new affordable housing units.

Will Low Income Housing Tax Credits Decline in Value?

Calls to reduce the corporate tax rate, which stands to lower the value of the Low Income Housing Tax Credits (LIHTC) would effectively slash the number of affordable housing units being produced around the country, —undermining a program HUD cites as “the most important resource for creating affordable housing in the United States today.”

Each year, the LIHTC provides state and local agencies the equivalent of nearly $8 billion in budget authority to issue tax credits to fund affordable housing construction and development. The credits to investors allow for a matched credit against federal taxes in exchange for funding affordable housing and ensure the equity needed to fund development for development nationwide. If corporate tax rates fall by such a large rate, however, demand for these tax credits could fall as well, as investors have less reason to use them to reduce their tax bills.

 

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