Even before Hurricane Harvey dumped 50 inches of rain on Houston, damaging hundreds of thousands of homes and apartments, affordable housing was already scarce. Because of rising rents, more than 200,000 low-income residents were spending over half their earnings on someplace to live.
But a provision in the tax bill passed by the U.S. House of Representatives would only intensify the housing crunch in the nation’s fourth-largest city -- and others across the U.S. -- by crippling affordable housing construction, developers and local government officials say.
The House measure would eliminate a form of tax-exempt debt called private-activity bonds -- and, consequently, tax credits generated by the securities -- after Dec. 31, wiping out a key tool used to finance more than half of the affordable units built each year, according to the National Council of State Housing Agencies.
The shift would jeopardize ITEX Group’s $50 million acquisition and renovation of the Villa Americana, a 258-unit low-income complex in south Houston that was built in 1972.
“If this tax legislation ever gets through, the project will probably die," said Chris Akbari, ITEX Group’s president and chief executive officer. “There’s no way right now to bridge the gap for some of these projects that need to be rebuilt or need to be built in these Hurricane affected areas."
Read more: Mapping the surge in muni issuance
While the Senate’s plan doesn’t eliminate private activity bonds, or PABs, the subsidy could still be pulled when negotiators iron out the differences between the two bills. That possibility is alarming developers, housing advocates and city officials who are lobbying Republicans to keep the provision out of the final legislation.
A Massive Crisis
If they’re not successful, the number of affordable rental units built nationwide over the next decade may be reduced by as much as 880,000, according to an estimate by Novogradac & Company LLP, an accounting and consulting firm specializing in real estate.
“We view this as a massive crisis," said K. Nicole Asarch, president of the Texas Affiliation of Affordable Housing Providers.