For Immediate Release: June 30, 2017
Contact:
Jeff Smith, Missouri Workforce Housing Association – (314) 323-0915 (c)

*** Affordable Housing Advocates Address Tax Committee Report ***

JEFFERSON CITY – Missouri Workforce Housing Association (MOWHMOWHA LogoA) Executive Director Jeff Smith issued a statement in response to the report of the Governor’s tax committee.

“After the appointment of some of the state’s most vocal opponents of affordable housing programs, the Governor’s tax committee unsurprisingly recommended actions that will end these programs,” said Smith. “It’s unfortunate that the committee has chosen to ignore research on the efficacy and long-term savings of affordable housing, as well as testimony before the Committee from dozens of affordable housing residents and their advocates.” In fact, the committee failed to even schedule hearings in St. Louis, Kansas City, Joplin, Columbia, Kirksville, and other Missouri population centers.

The report’s inaccuracies led to uninformed proposals concerning the Low-Income Housing Credit (LIHTC).

  • First, the committee proposes using forgivable loans as a more “efficient” way to build affordable housing. But tax credits are the most efficient means of providing capital for affordable housing as they’re less taxable than other mechanisms. In the quest for increased “efficiency,” then, the committee would actually make the program less efficient.

Also, the state would incur 100% of the risk related to the development, versus the 0% risk it currently. Under program rules, credits don’t flow until units are leased according to stringent guidelines, and credits are recaptured from projects that fail or are in violation. Since one-third of approved projects are not ultimately built and others fall out of compliance, the state would lose a significant amount of money—a risk currently borne entirely by investors.

Last, loans would remove the private oversight that comes with a tax credit program. The LIHTC is preferable to the old government public housing system which suffered from tremendous waste and mismanagement, and which saw taxpayers spending money to tear down structures just 2-3 decades after they were built.

  • It’s inaccurate to suggest that LIHTCs receive “50 cents on the dollar.” This ignores 1) taxes and 2) decreased value of credits in years 2-10 due to inflation (i.e., time value of money).
  • The LIHTC program is not “growing unchecked,” or even growing at all. Rather, in the past decade, it has grown more slowly than the rest of the budget. And it is not starving other programs. While it has grown by almost $200 million since its inception in 1992, annual K-12 education spending has risen from $1.3 billion to nearly $4 billion.
  • The committee ignores costs that state and local governments avoid due to LIHTCs.

Per a state Department of Economic Development study, LIHTC reduces rents by an average of $288 month for elderly and disabled people who would otherwise not be able to afford their own apartment.  Given how much it costs local governments to provide emergency care for feeble seniors/disabled people in dilapidated homes, there are large savings: expenses never incurred, and lives saved when emergencies are spotted earlier in a large community with on-site support services.

Senior projects are an especially wise use of tax dollars because of Medicaid savings as a result of reduced nursing home use. Over the past five years, LIHTCs have helped build an average of 831 new senior units. Of those, 40% of seniors are detoured from nursing homes due to special services provided in tax credit units. Thus, an average of 332 units annually utilize LIHTC vs. a Medicaid-funded nursing home unit.  The average annual nursing home costs the state $29,871 per unit. Assuming 332 units annually, this would mean an annual cost to the state of $9.9M.

Conversely, the annual LIHTC allocation per elderly resident is $7,773, which multiplied by 332 units costs the state $2.5M. Thus, tax-credit senior housing brings $7.4M of annual savings to the state, a 10-year savings of $74M and a 74% savings over a scenario without tax credits.

  • Due to the duration of the credit and the local taxes that related construction activity produces, eliminating it today would not have any material budget impact for eight years.

Concluded Smith: “We hope to work with legislators to help ensure that taxpayers get the most bang for the buck from LIHTCs. This is the focus of our conversations with policymakers.”

MOWHA is a statewide organization of community organizations, public agencies, contractors, private and nonprofit developers, construction material suppliers, and other professionals—over 175 groups in all.

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