Housing Bubble
Housing industry calls for tax credits and incentives
February 12, 2003
A coalition of nine national housing organizations have called on the Government to expand tax credits for homeowners and create new incentives to increase the nation's affordable housing supply.
Such incentives would help alleviate the nationwide affordable housing crunch afflicting millions of America’s families – many of whom currently spend more than half of their incomes to pay the rent or mortgage.
The coalition, formed under the auspices of the National Housing Conference (NHC), a Washington-based non-profit organization focused on affordable housing and development, individually and collectively committed to calling on Congress to create new tools that will increase the supply of reasonably priced housing in order to meet pressing national needs. The coalition’s policy agenda is based on several recommendations included in the landmark 2002 report, Meeting the Nation’s Housing Needs, which was produced by the congressionally-appointed Millennial Housing Commission (MHC). The MHC found that almost 28 million households spend “more on housing than the federal government considers affordable and appropriate.”
“To narrow the massive affordability gap afflicting millions of America’s households, we are saying to Congress and the Bush Administration, ‘Here is the foundation for tomorrow’s national housing policy.’ Housing is essential to maintaining a strong economy and remains fundamental to the American dream, offering families the opportunity to build wealth, promoting self sufficiency, strengthening communities and providing a foundation for the economic growth of our nation. Together, let’s build the framework to meet the shelter requirements of the nation’s neediest,” said Conrad Egan, executive director of the NHC.
To support the production of affordable for-sale housing, the coalition recommends implementing a Homeownership Tax Credit, like the one proposed by President Bush in his fiscal year 2004 budget. For example, on an annualized basis, the President's proposal could produce as many as 50,000 new and rehabilitated homes; contribute an estimated $2 billion of private equity investment resulting in a total annual investment of $6 billion; create some 122,000 jobs; and generate approximately $4 billion in wages and $2 billion in taxes and fees. The U.S. Treasury Department estimates the cost of the program is $2.4 billion over five years -- a modest investment that would spur economic growth and help open the door to homeownership for hundreds of thousands of families, especially minority families living in distressed urban and rural communities.
The coalition also calls for a new multifamily production program to expand and preserve the supply of affordable rental housing for extremely low- to moderate-income families in communities built for residents with a mix of incomes. The coalition believes that additional production of tens of thousands of apartment units annually is essential to respond to the overwhelming demand for this type of housing. The production program would be used for new construction and substantial rehabilitation, including necessary operating assistance for units assisted under the program.
Additionally, the coalition reaffirmed its support for the nation’s existing housing delivery programs while at the same time offering proposals for improving and strengthening the current system. Regarding the Federal Housing Administration (FHA) and the Government National Mortgage Association, the coalition calls for new authorities to permit separate human resources, contracting, legal assistance, budgeting, and earnings management that would improve the entities’ risk management. It also recommends guarding against changes that would compromise the integrity and effectiveness of the secondary market.
The Low Income Housing Tax Credit (LIHTC), the HOME Investment Partnerships program (HOME), and the Mortgage Revenue Bond (MRB) program are highly effective affordable housing programs. The coalition strongly supports these programs and recommends enhancements to make them more effective. For example, this could be achieved by repealing the MRB Ten-Year Rule, reforming how MRB purchase price limits are determined and making LIHTC development possible in rural and very low-income areas. The coalition also identified preservation of existing rental units as an essential ingredient for maximizing the availability of affordable rental housing. It therefore supports congressional enactment of tax incentives to encourage the transfer of these properties for long-term affordability in good physical condition.
The nine-member housing coalition is comprised of The Enterprise Foundation, Fannie Mae, Freddie Mac, the Local Initiatives Support Corporation, the Mortgage Bankers Association of America, the National Association of Home Builders, the National Association of Realtors, the National Council of State Housing Agencies and the National Housing Conference.
Source: The
Enterprise Foundation
