Housing Credit Extension Is a Must--and Riots Tell Us Why

The Los Angeles riots focused a national spotlight on the growing divide between rich and poor in cities across America. Nowhere is that gap illustrated more dramatically than in housing. In this comparatively wealthy nation, millions of poor men and women live with their children and sometimes their elderly parents in crowded or inferior housing; others live in housing that is decent but so costly that other areas of their lives must suffer severely; thousands more have no place at all to call home.

President Bush and Congress can ease this crisis by permanently extending the federal low-income housing tax credit before this investment incentive expires June 30.

The tax break deserves renewal because it remains the primary federal resource for financing additional new and affordable housing. It also forms the cornerstone of the numerous public/private partnerships that are increasingly the salvation of cash-short cities and states.

The credit typically generates funds used to construct or renovate at least 100,000 apartments a year. Since being created by the 1986 Tax Reform Act, it has generated financing for more than 420,000 units of decent and affordable rental housing.

NO FREE RIDE FOR PUBLIC: Such a benefit, however, is not without cost to the public. In exchange for investing in the construction or renovation of long-term affordable housing, businesses gain a credit on their federal tax bills. The deferral of those taxes is expected to cost the federal Treasury up to $1.5 billion over the next five years. That loss, especially significant in a time of burdensome federal deficit, fuels the argument against extending the tax credit, despite fairly strong bipartisan support.

President Bush in March vetoed a tax bill that contained a permanent extension of the low-income housing tax credit and other tax breaks. That was before the Los Angeles riots changed the political climate and put the problems of cities back on the national agenda.

Now Congress is again considering extending the low-income housing tax credit as part of a sweeping urban initiative. The extension merits approval before the July 4th recess, before politicians turn their attention first to the political conventions and then to the November elections. Any delay in the extension of the tax credit could cause a slowdown in housing production similar to the dip in 1990 when the credit was renewed for only nine months instead of a year.

Bush and others should consider the success of the low-income housing tax credit. In California, tax breaks have been used to create more than 30,000 units of affordable housing, generating 17,000 jobs in the bargain.

Tax credits are allocated on the basis of a state’s population. California typically receives more than $35 million in tax credits per year.

The funds generated by those credits are funneled by real estate syndicates and community development advocates such as the Local Initiatives Support Corp. to nonprofit community developers and for-profit housing developers. The developers use the financing to create apartments, townhouses and the single-room-occupancy hotels that often provide refuge for men and women who had been homeless.

In Los Angeles, where nearly 500,000 families spend more than half of their meager incomes on rent, tax credits have been used to build attractive townhouses in Watts, rehabilitate senior citizens’ housing in Little Tokyo and finance apartments in poor areas such as Pico-Union and parts of East Los Angeles. Many buildings include child care centers and other amenities rarely found in low-income apartment complexes.

Family housing developed by the Concerned Citizens of South Central Los Angeles and the Second Baptist Church is scheduled to open this month on Central Avenue in the historical heart of South-Central. The two apartment buildings contain 40 units, a community room, a study area for children and benches to encourage Latino and black residents to get to know each other in the increasingly Latino neighborhood.

A BARGAIN AMID HIGH RENT: Other new housing built with tax credits includes apartments large enough for families with four or more children--the type of large apartments that are often impossible for low-income families to find. Yet these sought-after apartments cost no more than a third of the average income of their tenant families; rents typically range from $175 to $500 per month. That’s a bargain in a city where a one-bedroom apartment normally rents for about $600 and thousands of poor families pay to live in garages.

To keep pace with the growing demand, California must create 300,000 new units of affordable housing by the turn of the century. That task will be impossible without some form of federal assistance. But government alone cannot solve the affordable-housing crisis. It can and must nurture greater private investment in housing. That’s why President Bush and Congress should extend the federal low-income housing tax credit.

Power-Housing

Number of affordable housing units created by federal low-income tax credits in California. 1987: 2,497 ‘88: 5,657 ‘89: 7,960 1990: 5,391 ‘91: 9,122 Source: National Council of State Housing Agencies