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A tax deal proposed by Washington, D.C., lawmakers could lead to the creation of more than 200,000 new homes for low-income families.
The proposal would boost the low-income housing tax credit that incentivizes developers to build new affordable-housing units.
The plan is part of the broader Tax Relief for American Families and Workers Act of 2024, introduced by Sen. Ron Wyden, an Oregon Democrat and the Senate Finance Committee chairman, and Rep. Jason Smith, a Missouri Republican and the House Ways and Means Committee chairman.
The bipartisan proposal would also expand access to the child tax credit and give tax breaks to businesses.
The proposed policy comes at a “time when so many people in Oregon and all across America are getting clobbered by rising rents and home prices,” Wyden said in a statement.
The 200,000 new housing units would be a “modest and important” increase, but “too many rental homes built with the tax credit are still too expensive for households with the lowest incomes,” Sarah Saadian, the senior vice president of public policy and field organizing at the National Low-Income Housing Coalition, told MarketWatch.
But because “Congress didn’t include key reforms in the tax package, we fear that most of the rental homes built with these new resources will be too expensive for extremely low-income renters, including those experiencing or at risk of homelessness,” Saadian added.
The LIHTC is a tax incentive aimed at subsidizing the cost of construction or rehabilitation of affordable rental housing for low- and moderate-income tenants. The homes can be apartments, single-family homes or even townhomes.
The tax policy was introduced in 1986, according to the Tax Policy Center, which estimates that more than 2 million units have been created in nearly four decades due to the LIHTC. The program helped finance between 50,000 and 60,000 new housing units in 2019, a separate report from the Urban Institute estimated.
Under the LIHTC, the federal government issues tax credits to states, which then award them to private developers. Equity investors can invest in a property in exchange for tax credits. Once a housing project becomes open to tenants, property developers — or even investors — can claim the LIHTC over a 10-year period, according to the Tax Policy Center.
The lawmakers’ proposal calls for states to be allowed to allocate more credits toward affordable-housing projects. Instead of the 9% ceiling states had between 2018 and 2021, the proposed tax framework would allow states to give up to 12.5% of the credits to developers building affordable housing between 2023 and 2025.
The proposal also lowers the requirement for builders regarding financing with bonds.
Wyden has set a Jan. 29 goal for passing the bipartisan tax deal, though that timeline is not certain.
Related: Tax deal unveiled in Congress. Here’s how U.S. businesses and families could benefit.
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