Affordable Housing Rears Its Ugly Head Again

Pedcor Corporation is proposing a multi-family development on the east side of I-35 near Forbes Middle School. The development is proposed as a 192-unit apartment community, 100% of which would be income and rent restricted for individuals and families with incomes at or below 60% of the Area Median Income. The developer will use tax exempt bonds and federal tax credits to finance the project.

The proposal is scheduled to come to City Council at the 28 November meeting. The developer is asking for a vote of "No Objection". A vote of "No Objection" is the same as a vote supporting the project as far as the Texas Department of Housing and Community Affairs is concerned. The results of the Council vote will be forwarded to the Texas Department of Housing and Community Affairs for a decision on the tax credits. 

The CATO Institute has just released an analysis of the low-income housing tax credit. CATO

Here is their executive summary:

The federal government subsidizes housing through numerous tax and spending programs. One of the more inefficient programs is the Low Income Housing Tax Credit (LIHTC). The program provides $9 billion a year in tax credits to support housing construction. The federal government distributes the credits to the states, which in turn award them to developers to cover part of the costs of constructing apartment buildings and other projects. In return, developers must cap rents for the units they set aside for low-income tenants.

The benefits of the LIHTC are supposed to flow through to tenants in the form of lower rents, but studies suggest that investors, developers, and financial companies gain most of the benefits. The program has complex administration, is prone to abuse, and produces costly low-income housing.

The Trump administration and Republicans in Congress are considering major tax reforms aimed at reducing tax rates and ending unjustified tax breaks. They should consider repealing the LIHTC. It complicates the tax code and is a poorly targeted solution to housing affordability problems.

Instead of federal subsidies, a better way to reduce housing costs would be through state and local policy reforms. The states should reduce the burden of building and zoning regulations to increase the supply of housing, including multifamily housing for low-income tenants.

Thus there are least major two reasons why the City Council should not support affordable housing in Georgetown.

1. It is not the proper role of government to favor one business or business segment over any other.

2. It does not make economic sense to support low income housing through the tax code.

There are many other reasons for the City to not support affordable housing projects and those may be detailed in a later post.