Panelists convened to testify before the Senate Finance Committee called for enhancements of the low income housing tax credit as a means of making real estate more available and affordable.
During a March 7, 2023 hearing, Denise Scott, president of Local Initiatives Support Corporation, testified that the credit “has been responsible for the production of most of the affordable housing, and more than 50 percent of the households in tax credit properties are extremely low income families.”
An overview of various tax policies was prepared for the hearing by the Joint Committee on Taxation and can be found here.
She suggested Congress could “spur the creation of over 2 million more rental units over the next decade by restoring the 12.5 percent increase to the formula for the allocated tax credits.” That increase was enacted in 2018 but expired in 2021.
Sharon Wilson Geno, president of the National Multifamily Housing Council, recommended that the low income housing tax credit be expanded to capture more middle class families and build “off of the success of the low income housing tax credit.”
However, Mark Calabria, senor advisor at the Cato Institute, urged a little restraint when it comes to using tax policy to stimulate the housing market.
“Most indicators suggest that rents would decline over the next 12-to-18 months,” he testified before the committee. “So, I would just urge some cautiousness to thinking about adding stimulus to additional construction at a time when we are likely passing the peak of the cycle.”
Wilson Geno said that the private market “simply cannot afford to provide housing in the amounts we need it in the lowest income tiers, and also the middle-income tier. So those tax incentives are incredibly useful.”
Calabria also cautioned about offering any additional credits that are focused on the demand side of housing equation.
“We need to be cautious about adding demand subsidies that simply run up prices, which is how we’ve gotten the inflationary pressures we face today,” he said.
