Why Do Republicans Support the Low-Income Housing Tax Credit?
President Donald Trump’s “big, beautiful bill” aims to avert the tax increases that would result from the expiration of the 2017 Tax Cuts and Jobs Act, and it’s drawn criticism for not doing enough to reduce the debt or deficit. Earlier in June, The Washington Post reported on publicly funded homes in some cities costing taxpayers more than $1 million per unit, but little attention has been paid to Republican support for the Low-Income Housing Tax Credit (LIHTC) which is partially responsible for these cost increases, and which would receive a budget increase from $13.5 billion to $14 billion in the Republican bill. For a party theoretically devoted to reining in government spending, the housing tax credit portion of the tax bill does the opposite.
The bill extends the temporary 12.5 percent increase in the LIHTC through 2029. The accounting firm Novogradac has estimated that some 527,000 subsidized rental apartments could be financed between 2026 and 2035, as the 10-year tax credits are used. Their cost would come on top of the ongoing expense of the hundreds of billions in previously allocated 4 percent and 9 percent tax credits, which housing developers sell to finance construction and write off gradually. Since 1987, approximately 3.7 million LIHTC units have been built.
The primary criticism of this system has focused—not incorrectly—on the high cost of construction, which can be staggering. The Terner Center for Housing Innovation at the University of California, Berkeley, found that the typical tax credit–financed project in California costs $708,000 per unit. In Chicago, the Evergreen Real Estate Group said that its Encuentro Square LIHTC-financed projects cost $766,350 for each of its 89 units.
Costs are driven by what the Congressional Research Service describes as a bureaucratic “process of allocating, awarding, and then claiming the LIHTC” that is too complex and lengthy. Costs continue to increase, driv
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