Roller coaster for affordable housing
It’s a wild time for the affordable housing market.
Here is a rundown on what is occurring, as well as my analysis on what is coming up.
- The House repealed the 4% Low-Income Housing Tax Credit (LIHTC). This makes private investment in Affordable Housing much less desirable.
- The House also cut the corporate tax rate from 35% to 20%. This means that businesses will need fewer credits, the going rate for LIHTCs will decrease, and there will be less investment in Affordable Housing.
- However, it’s not all bad news. For these changes to take effect, they need to pass the Senate. While the Senate bill does cut the corporate tax rate, it doesn’t include any changes to the 4% credit. I predict that Affordable Housing will stay strong, but developers are going to have to become a little more creative with their deals.
It’s interesting to note that a Republican president, Ronald Reagan, was the one who signed the credits into effect in 1986. Reagan was a proponent of Affordable Housing, which is a much better approach than the public housing model.
Even though the industry is taking a few hits now, I believe there is still a place for optimism. My clients continue to invest, and are realizing healthy returns within the Affordable Housing market.
One thing is for sure — it’s going to be an exciting ride ahead. As always, feel free to reach out regarding your own real estate portfolio. I would be happy to bring my team’s expertise to identifying the best strategies for your deals.
Wishing you a great 2018.