Keeping a Housing Lifeline Open : Low-income housing tax credits are spared the budget-cutters’ ax

Congress spared a tempting target during the recent budget battles. The lawmakers extended the life of low-income housing tax credits, the principal government resource for financing new and affordable rental housing.

Eliminating the tax credits would have saved the federal government as much as $300 million a year. But it would have hurt thousands of poor families, low-income senior citizens and homeless Americans.

The credits provide a major tax break for private corporations that invest in affordable housing. The businesses pay for the rehabilitation or construction of low-income housing in exchange for a credit deducted from their federal income tax bill. The work is typically done by nonprofit developers who claim to leverage the private investment by as much as 10 times the initial amount.

Nationally, the tax credits generate investments used to produce 100,000 apartments, townhouses and rooms in single-resident-occupancy hotels every year. In California, the tax break produces enough money to build or preserve 10,000 homes. Locally, tax credits have translated into renovated single-occupancy hotels on Skid Row, rehabilitated housing for senior citizens in Little Tokyo, townhouse apartments in Watts and new family housing in East Los Angeles.

The rents are subsidized to keep them within the reach of poor families who live on the minimum wage or welfare, senior citizens who live on fixed incomes and homeless people who live on general relief. The tenants pay up to 30% of their incomes for rent, a limit that keeps the apartments affordable in expensive housing markets like Los Angeles.

The tax credits have taken on even greater significance because of the recent defeat of Proposition 145. That bond measure would have generated $315 million to help moderate-income families buy their first homes and to assist thousands of poor people, including farm workers and their families, to either get in, or stay in, decent apartments and rooms.

The bond measure was significant because California, unlike other states, does not adequately fund a variety of vigorous statewide housing programs despite an affordable housing crisis and a highly visible homeless population in many cities. The new state funds would have helped.

Given the uncertain economic climate, it’s unlikely that federal or state housing funds will grow significantly. There is no doubt, however, that millions of Americans need better and more affordable housing.