Congress may be in a cost-cutting mood, but some programs in the federal budget are not expendable. Low-income housing tax credits, the primary government resource for financing new affordable housing, is one of them.
The credits provide a strong incentive for private corporations to invest locally. In exchange for financing the acquisition, rehabilitation or construction of low-income housing, investors receive a credit deducted from their federal income tax bill.
That tax break encourages the business community to want to build housing for poor people. It also encourages solid public-private partnerships, a vital social contract as government revenues become more limited.
The tax credits cost the federal government $300 million a year, but they also generate the investment used to produce 100,000 apartments, townhouses and single rooms designed for senior citizens, the poor or persons just down on their luck. These tenants pay rents that by law cannot exceed 30% of their incomes; that makes rents affordable even in expensive housing markets.
The tax credits are quite popular politically. Housing Secretary Jack Kemp is a big booster. More than 75 members of the Senate and more than 200 members of the House also favor renewal. Mayors also endorse the credit because it funnels significant investment to local housing needs. Los Angeles Mayor Tom Bradley is encouraging California businesses to invest $125 million in low-income housing over the next five years. That investment would pay for the construction of 4,000 rental units and provide subsidies to keep the rents within the reach of very poor families.
Given such bipartisan support, extension should be a done deal. But the enormity of the nation's fiscal and political dilemmas requires Congress to put just about everything on the table. Even so, millions of Americans need affordable dwellings. It would be a crime if Congress failed to extend the low-income housing tax credit.