Nugget of Hope for Homeless

The Senate Finance Committee’s compromise tax package contains a nugget of hope for homeless or poorly housed Americans. The measure, if passed as President Clinton has proposed, would extend permanently the low-income housing tax credit.

That important tax credit should be extended because it works. Investments generated from this tax provision were used last year to finance 94% of the new multiple-family housing constructed in this country. These affordable apartments, which typically rent for under $500, are badly needed, especially in crowded and expensive regions like Southern California.

The tax incentive works this way: Corporations that invest in affordable housing projects get a break on their taxes. The big businesses and banks don’t actually have to build or renovate the housing. The firms typically funnel their investments to nonprofit developers through such organizations as the Local Initiatives Support Corp. Through these partnerships, community developers maximize every dollar to create housing.

These good works are not without cost to taxpayers. The revenue loss to the U.S. Treasury is estimated at $5 billion over the next five years. That drain is what has jeopardized the future of the tax credit. Created as part of the 1986 Tax Reform Act, it was scheduled to “sunset” in three years. But Congress has saved the credit with temporary extensions. It should save the credit once again, and permanently.

The housing tax credit is a net benefit to taxpayers because it delivers much more than housing. This tax break also generates jobs. Housing advocates claim the investment pays off with 90,000 construction jobs and related jobs yearly.

The low-income housing tax credit also merits extension because it is the primary federal resource for the creation of affordable housing. Gone are the days of big government spending directly on new housing. The tax credit, an indirect subsidy, has been used since 1986 to create more than 600,000 units of rental housing.

Affordable housing is in desperately short supply in most cities. The low-income housing tax credit isn’t the only solution to the housing crisis, but it is the best the federal government is offering and should be extended.