Complete tax reform: peril and promise for housing
In an ongoing effort to overhaul the tax code, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) made an announcement recently that the Senate would be taking a “blank state” approach to tax reform. They said that this means everything will be taken out of the tax code and individual provisions will be added back only if compelling arguments can be made for why it should survive the tax overhaul process. Advocates, including MHP, are busy taking this opportunity to promote important housing policies, ranging from United for Homes‘ mission to fund the National Housing Trust Fund, to Affordable Rental Housing A.C.T.I.O.N.‘s campaign to protect and strengthen the Low Income Housing Tax Credit.
Tax overhaul is complicated, so the Senate Finance Committee leadership issued three guiding principles to help determine whether a provision should be re-added to the tax code:
1. Whether the tax provision helps grow the economy
2. Whether the tax provision makes the tax code fairer
3. Whether the tax provision effectively promotes other important policy objectives
Now it us up to housing advocates, providers, developers, and tenants to demonstrate how United for Homes’ and A.C.T.I.O.N.’s proposals serve these three principles.
United for Homes’ proposal to reform the mortgage interest deduction
This is a terrific opportunity for our Senators to submit the United for Homes proposal. United for Homes, of which MHP is a member, is the campaign to fund the National Housing Trust Fund (NHTF). The NHTF, once funded, will expand, preserve, rehabilitate, and maintain the supply of rental housing affordable to America’s poorest families.
The proposal advanced through the United for Homes campaign will create a much needed reform to better target the country’s biggest housing-related tax expenditure–the mortgage interest deduction. This proposal restructures the mortgage interest deduction into a tax credit and thereby serves more low income home-buyers. As it currently stands, the mortgage interest deduction overwhelmingly benefits higher-income homeowners. A tax credit will put money in the pockets of more lower income home purchasers.
The proposal also creates a funding stream for the NHTF through the billions saved through converting the deduction to a tax credit. Considering that the NHTF targets the lowest-income Americans, this is the best opportunity out there to make a major dent in homelessness. Find out more about the NHTF, including who it benefits and how it will work in Minnesota, once funded.
A.C.T.I.O.N.’s campaign to preserve and strengthen the Low Income Housing Tax Credit
A.C.T.I.O.N., of which MHP is a member, is focused on preserving the Low Income Housing Tax Credit (LIHTC). Advocacy is needed so that the most important program we currently have to create rental housing does not disappear.
LIHTC has been responsible for the creation of 42,735 affordable housing units in Minnesota since 1986. LIHTC encourages investment in the construction, rehabilitation, and preservation of affordable housing by providing tax credits over a 10-year period. These tax credits are awarded to developers, who in turn “sell” them to investors in return for the funding needed for construction and rehabilitation of affordable housing. This unique public-private relationship also supports job growth, which is good for the economy. Preserving LIHTC is of utmost importance during this time of looming, drastic HUD budget cuts.
This is also a great opportunity to strengthen LIHTC by permanently extending the 9% floor rate for new construction and substantial rehabilitation Housing Credits and the 4% rate for acquisition Housing Credits. Permanently fixing these floor rates is good policy because it removes the uncertainty and financial complexity associated with the floating rate. As it stands, the 9% fixed floor rate will expire at the end of the year and the 4% rate is now about 3% because of the “float.”
What can you do?
Senators Baucus and Hatch are soliciting comments from their fellow Senators until July 26th. This means that Senators Franken and Klobuchar need to hear from you in the next week!
Call the United States Capitol switchboard at 202-224-3121 and ask to speak with the offices of Senators Franken and Klobuchar.
You can also send letters to our Senators, asking them to adopt both the United for Homes proposal to fund the NHTF and A.C.T.I.O.N.’s proposal to protect and strengthen LIHTC. United for Homes has provided a NHTF template letter, and A.C.T.I.O.N. has provided a LIHTC template letter.
Do not hesitate to reach out to MHP for help in drafting a letter or coming up with talking points involving either LIHTC or United for Homes. Contact MHP’s Brandon Gil at firstname.lastname@example.org ~ 651-925-5556.
In the meantime, please familiarize yourself with United for Homes and endorse it if you haven’t done so already.