02.26.08

Cantwell Aims to Increase Access to Safe, Affordable Housing for Washington, American Families

Senators Push to Eliminate Red Tape in Order for Developers to Build and Potential Tenants to Move In

WASHINGTON, D.C. – Tuesday, U.S. Senator Maria Cantwell (D-WA) introduced the Affordable Housing Investment Act to create more affordable housing by updating and modernizing the low-income housing tax credit, and made the following statement in the Congressional Record:
 
[Text of statement submitted to the Congressional Record]
 
“Mr. President, the issues of housing are very much on the minds of the American people and those of us in the Congress.  While we focus on the challenges that homeowners currently are facing, we must not fail to recognize that there are a lot of families that dare not dream of owning their own home, they dream simply of having access to safe, affordable rental housing in our communities.
 
“Today, I am pleased to introduce the “Affordable Housing Investment Act,” a bill that will update and modernize the low-income housing tax credit program—a program that we all know has been tremendously successful in helping construct needed affordable housing in communities across our country.
 
“We often find ourselves reacting to government programs that are broken; this bill is about a government program that works but can be improved upon. The low-income housing tax credit program was created as part of the Tax Reform Act of 1986 and made permanent in 1993.  Designed as a public/private funding vehicle, largely administered by the states, this program has become the most successful housing production program in existence.
 
“These tax credits make it attractive for investors to forego highly profitable luxury residences, in order to provide housing for those most in need.  Without affordable housing, many low-income Americans would find themselves on the street. Instead, these families can provide shelter to their children and have a secure place to live near where they work and go to school.
 
“State agencies award housing tax credits to housing developers, who turn the credits into construction funds by selling them to investors.  There funds allow developers to borrow less money and pass through the savings in lower rents for low-income tenants.  Investors, in turn, receive a 10-year tax credit based on the cost of constructing or rehabilitating apartments that cannot be rented to anyone whose median income is higher than 60 percent of the median income in the area.
 
“Each state’s annual housing credit allocation is capped. In 2007, the cap is $1.95 per capita, with a minimum of $2.275 million.  States put each development through three separate, rigorous evaluations to make sure it receives only enough housing credits to make it viable as low-income housing for the long term.
 
“Since its inception, this program has created nearly 2 million homes, including about 130,000 annually, for low-income families at restricted rents for terms of at least 30 years—housing that not have occurred without the tax credit.
 
“The credit is responsive to the needs of the local communities.  It works for new construction, rehabilitation, and preservation of affordable housing. It works in cities, suburbs, and rural areas. It revitalizes low-income communities. It serves families, the elderly, the disabled, and the homeless. Each state sets its own housing priorities, and developers compete aggressively to meet these priorities.
 
“The program is cost efficient and has a high compliance rate. The marketplace imposes discipline on the program so that the taxpayer’s dollars are well spent. The tax credit program is complex with many technical rules governing a building's qualification for credit, the amount of the credit, and the ability of the owner to use the tax credit to offset federal income tax liability.
 
“If done incorrectly, fees can be forfeited, credits can be lost, and projects may fail.  The consequence of running afoul of the rules has proven to be a secret of the success of this program. Investors receive their tax credits only if housing is built on time and on budget, operates successfully within local housing markets, and is well maintained over time. The annual failure rate for housing credit properties is 0.02 percent annually, well below that for other housing or commercial real estate.
 
“As successful as the housing tax credit program is, it could benefit significantly from updating. The Affordable Housing Investment Act of 2008, which I am introducing with Sens. Smith, Kerry, Coleman and Salazar, modernizes the tax credit rules in order to make it even more useful.
 
“First, it eliminates the penalties for combining housing credits with other federal housing programs.  The bill proposes to remove various restrictions that make it hard to coordinate housing credits with other federal policies and programs. These restrictions frustrate efforts to address local needs and add unnecessary legal and accounting costs. In some cases these restrictions were set many years ago to prevent properties from receiving excessive subsidy. Such restrictions are no longer needed because states examine each project at three points to ensure that it needs the amount of housing credits allocated to it. In addition, the high demand for housing credits and other subsidies motivates all subsidy providers to limit subsidies to the minimum amount necessary.
 
“Second, the bill helps foster low-income community revitalization by facilitating the inclusion of child care, primary health care, recreation and other community service facilities in these projects and aiding with the specific needs for housing in rural areas.
 
“Third, the bill preserves existing affordable housing by easing the ability to rehabilitate older properties.
 
“Finally, the bill eliminates unneeded inefficiencies in the tax laws that serve no public policy purpose.
 
“The legislation has been endorsed by the National Council of State housing Agencies, the Affordable Housing Tax Credit Coalition, the Housing Development Consortium, Local Initiatives Support Corporation and Impact Capital, National Association of State and Local Equity Funds, Seattle Housing Authority, and the Washington State housing Finance Commission.
 
“The tax credit program may be invisible to the people that now have a roof over their head, but it is indispensable to our ability to meet the growing demand—and diminishing supply—for affordable housing.
 
“For example, Port Orchard Vista – a 42 unit apartment building for low income seniors – could not have been built if it hadn’t been for the tax credit program.  One resident, a 62-year old grandmother named Jackie, would be homeless if this project had not been built. Jackie’s social security check is $600 per month. Her rent was $605, not including utilities – or groceries! She was selling her furniture and her mom’s old cookbooks to make up the difference. She was just a few months away from being homeless.
 
“Thanks to the tax credits, the Kitsap County Consolidated Housing Authority was able to get this project built and keep Jackie off the street.  Today, Jackie’s rent is $200 – including utilities.
 
“The Village at Overlake Station in Redmond Washington was built in 2001 and offers beautiful public spaces and apartment homes. Sarah, a single mother, came to Overlake Station in late 2005 after spending that summer and fall living out of her vehicle with her two children. She was extremely grateful to find a suitable, affordable apartment before the cold weather came.  She and her children were forced to huddle together in the backseat of her car to stay warm as they slept and she was concerned about their safety.  Though she tried to be cautious, she just knew should find a better way to take care of her children.
 
“Sarah and her children have proudly lived at Overlake for two years. Soon they will move into a new house, thanks to Habitat for Humanity. In two years, Sarah has come from homelessness to homeownership -- thanks to the Low-Income Housing Tax Credit program.
 
“These stories can be replicated in every community in my state and across the country.
 
“In 2002, the Millennial Housing Commission, said in its final report to the Congress: “Securing access to decent, affordable housing is fundamental to the American Dream. All Americans want to live in good-quality homes they can afford without sacrificing other basic needs. All Americans want to live in safe communities with ready access to job opportunities, good schools, and amenities. All parents want their children to grow up with positive role models and peer influences nearby. And the overwhelming majority of Americans want to purchase a home as a way to build wealth.”
 
“By leveraging private capital to build affordable housing units, we are also helping our local communities. People left with no affordable housing options join the ranks of the homeless and then become the responsibility of our cash-strapped communities. We can alleviate some of the community responsibilities of caring for the homeless, the disabled, and other vulnerable low-income families by helping to provide these people an affordable place to call home. I encourage my colleagues to join me in this effort.”
 
 
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