U.S. Senate Votes to Extend Tax Credits on Housing for Poor

The U.S. Senate voted Tuesday to continue for six months tax credits for those who invest in affordable housing, thus improving the chance that Los Angeles might save at least some of the construction projects planned for 2,500 poor families.

City leaders had hoped for a permanent extension of the credit, which last year helped build 100,000 units of low-rent housing nationwide.

“All I can say is that it’s better than nothing,” Los Angeles Housing Authority Director Gary Squier said of the extension.

The tax credits still face a possible presidential veto.

The program gives investors tax credits equivalent to the amount invested in housing for the poor, spread over a 10-year period. The program helped create more than 15,000 units of low-income housing in California since it began less than three years ago, and has won wide popularity among banks, oil corporations and other profitable companies with large tax bills.

If the tax credits are not extended beyond the Dec. 31 expiration date, a “devastating and immediate blow” would be dealt to low-income housing construction, city leaders in Los Angeles and elsewhere say.

The elimination of the credit would “have the effect of a major earthquake, undermining the ground on which our housing is built,” said Boston Mayor Raymond Flynn, who was part of a bipartisan group of mayors and other leaders who were in Washington Tuesday to lobby for the extension of the credits.

The House had voted earlier to extend the tax credits indefinitely, attaching the measure to a deficit reduction bill. On the Senate side, the six-month extension was attached to a Poland aid bill Tuesday.

Housing and Urban Development Secretary Jack Kemp is a vigorous supporter of the tax credits. However, they remain threatened by a dispute between congressional Democrats and the Bush Administration--a battle that has nothing to do with housing.

President Bush has so far held the tax credits hostage to his capital gains tax cut plan, which has been effectively killed for this year. Bush may kill the housing tax credits this year so he can use it as a bargaining chip next year when he again will pressure Democrats to approve his capital gains cut.

Squier said the temporary extension of the tax credits “was portrayed to me as a way of ensuring a live hostage instead of a dead hostage to the capital gains tax.”

Half of Los Angeles’ housing for very low-income families relies upon the tax credits, Squier said.

“We are talking about anticipated housing that could affect as many as 10,000 poor individuals next year,” he said.

The tax credits are particularly important to Los Angeles because the city has the worst rental affordability crisis in the nation, with 300,000 low-income and working-class families paying rents considered unaffordable by the federal government.

Moreover, Los Angeles has an estimated 35,000 homeless people, second only to New York, which is estimated to have more than 70,000 homeless.

The uncertainty arises as Mayor Tom Bradley and the City Council are trying to adopt the city’s first major package of affordable housing programs--five years after most major U.S. cities took similar steps to fight worsening overcrowding and homelessness.

The tax credits are essential to the city’s efforts, already hurt by severely dwindling federal funds for housing during the Reagan Administration.

Deputy Mayor Mike Gage said that a new public-private housing partnership proposed by Bradley relies on the tax credits for “the lion’s share” of funding.

The need in Los Angeles is evidenced by the overwhelming response of poor families whenever a low-rent building is completed with the help of tax credit financing, said Marilyn Katz, a spokeswoman for the nonprofit National Equity Fund, a financing pool for low-cost housing.

The 24-unit Marengo Apartments in East Los Angeles drew 400 applicants, she said. At Villa Park in Pasadena, 160 families applied for just nine units.

While city leaders said an end to the credits would be devastating, they were not much encouraged by the prospect of a six-month extension.

Alice Callahan, founder of the Skid Row Housing Trust, said the extension “is just a drop in the bucket” compared to the permanent program they had expected.

Bob Wykoff, president and chief operating officer of Arco, said the tax credit measure is crucial in efforts to transform Los Angeles’ notorious Skid Row into a “decent place to live.” Arco is a major investor and corporate leader in housing for the poor here.

In 1989, Wykoff said, tax credits made the financial difference that allowed the Skid Row Housing Trust to transform 10 grimy, crime-ridden hotels into low-income studio units.

Callahan said her agency is involved in a five-year effort to turn 50 slum hotels into studio units for the homeless. It had been counting on $10 million to $15 million in tax credit financing in 1990 alone.

Times staff writers Tom Redburn and Robert L. Jackson in Washington contributed to this story.