January 29, 1998 | Read Time: 2 minutes
The Clinton Administration has announced that its 1999 federal budget will include a proposed $1.6-billion increase in tax credits designed to spur construction of low-cost housing.
The Administration estimates that the expansion will encourage the development of 150,000 to 180,000 new housing units over the next five years. At present, 75,000 to 90,000 units are created each year using the tax credit, which cost the government $392-million in 1996. The Clinton proposal would bring spending on the housing program back up to 1986 levels, after adjusting for inflation.
The Low-Income Housing Tax Credit is a complicated — but, many say, successful — means of inducing businesses to invest in affordable housing. Each state receives a block grant of credits every year based on its population. Developers of low-cost housing request credits from the state for their projects. Investors can then put money into the housing projects and collect the credits to reduce their annual tax bills.
Legislators in both the Senate and the House of Representatives have introduced bills that would similarly adjust the Low-Income Housing Tax Credit for inflation. Each would increase the amount of credit available per capita from $1.25 to $1.75 — the same as the Administration’s proposal. Those Congressional proposals go a step further, insuring that the amount of credit available to investors is adjusted annually for inflation in future years.
The Senate bill is sponsored by Republicans Alfonse M. D’Amato of New York and Bob Graham of Florida. Nevada Republican John Ensign is sponsoring the House bill.
The announcement by the Clinton Administration, made by Vice-President Gore this month while touring a poor Chicago neighborhood, caps a remarkable turnaround in the tax credit’s fortunes. As recently as 1995, it was in danger of being eliminated. Rep. Bill Archer, the Texas Republican who chairs the House Ways and Means Committee, had threatened to let the program expire because of what he said were serious cases of fraud and abuse.
Many of the chief beneficiaries of credit are non-profit groups that develop low-cost housing for the poor, such as the Local Initiatives Support Corporation in New York and the Enterprise Foundation in Columbia, Md.
Paul S. Grogan, president of the Local Initiatives Support Corporation, said he was optimistic that the increased lending for low-cost housing would become a reality. “There have been a lot of programs that have been failures and a lot of things that have been cut,” he said, “but this is one program that is working.”
