Lawmakers interested in simplifying the corporate tax code must take care to protect the low-income housing tax credit, which allows corporations to reduce their tax liabilities by investing in affordable housing. Without it, affordable-housing construction, which already falls far short of the need, would quickly grind to a halt.
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Created by Congress in 1986, the credit is available to investors prepared to sink money into new or rehabilitated low-income housing. It is responsible for about 90 percent of all the affordable housing that is built in this country, and has provided more than 2.5 million rental units since its inception. It also produces as many as 100,000 jobs each year.
The system is especially useful in times of disaster. After Hurricanes Katrina and Rita, for example, the credits were used to finance about 27,000 affordable homes and apartments in the affected states. This same mechanism could be extremely useful in the wake of Hurricane Sandy.
Despite its success, the tax credit program has not by itself kept pace with the burgeoning need. Recent statistics show, for example, that about 8.5 million low-income families are now spending more than half of their income on rent or living in hazardous, substandard housing. Beyond that, federal rental assistance programs reach only about a quarter of eligible families.
The rental programs must be enlarged, and the credit itself improved by focusing it more closely on needy areas and on the neediest families — those who earn only 30 percent of average median income in their area — while at the same time encouraging mixed-income developments.
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