As New York City’s housing crisis grows even more urgent, city and state officials are unfortunately facing new challenges created by the federal government’s recent tax overhaul. Cuts to the corporate tax rate are already having a negative impact on the strength of the Low-Income Housing Tax Credit (LIHTC), which is one of our most important tools for building and preserving affordable housing.
That is why we were encouraged to see City Council Speaker Corey Johnson begin to lay out a crucial roadmap for addressing these challenges in recent comments he made on affordable housing. Speaker Johnson made it clear that there must be greater collaboration between the city and state, including on matters such as bond issuance for housing development – and we firmly believe that elected and government officials from City Hall to Albany should do just that.
By increasing partnerships and strengthening the dialogue between city and state officials, we can all work together proactively to finance new affordable housing projects, even as the power of LIHTC becomes more limited due to federal tax reform.
To understand why this is important, it must be recognized, that, by significantly cutting corporate tax rates, the federal government has essentially limited the demand for LIHTC. These tax credits, which have historically been purchased by investors in order to help offset tax liability, no longer have has much value because corporations will be paying less in federal tax anyway.
This means that fewer tax credits will be purchased and city and state officials will have to adjust by seeking to achieve their existing goals will fewer federal resources. In other words, the city and state will have to work harder – and increase their level of collaboration – in order to continue financing tens of thousands of affordable homes each year and addressing the housing crisis for low- and middle-income New Yorkers.
Speaker Johnson accurately noted that the devaluation of LIHTC will have “major financial implications across the board,” and “may mean the city is going to have to put more subsidy dollars project by project.”
But it was his emphasis on working together that should provide the most hope for housing advocates, builders and all New Yorkers who care about making our city a more affordable place to live for families of all backgrounds.
Specifically, the speaker highlighted that that kind of increased collaboration could take place around the state’s issuance of bonds for projects across the city. On this issue, we agree that it is crucial to get more affordable housing projects in the development pipeline as quickly as possible, rather than waiting to squeeze projects in before bonding deadlines.
The bottom line is that while federal tax reform was a blow to low-income housing development in New York, it is a challenge that we can surely overcome if city and state officials take this opportunity to work together and achieve our shared goals – providing affordable housing for all.
Jolie Milstein is the President of the New York State Association for Affordable Housing (NYSAFAH).