Senator Wyden Proposes New Tax Credits as Moderate-income Households Struggle to Find Affordable Housing

An article in Bisnow notes that despite the influx of jobs in cities nationwide, wage growth has remained stagnant, leaving millions of moderate-income Americans without affordable housing. Citing an Enterprise analysis that showed that more than a quarter of renters who earn between 60 and 120 percent of an area’s median income nationwide are moderately cost-burdened, the article contends that the gap between subsidized low-income housing and high-end apartments continues to widen. “Wages have lagged rental inflation consistently for the past decade or more, even before the recession,” Enterprise Vice President of Policy Development Andrew Jakabovics said. “What you’re seeing is a rise in the number of moderately burdened households. That has gone up pretty dramatically over the course of the last two decades.” Developers have argued that their ability to build more affordable housing for the middle-income earning workforce is hindered by the price of land and rising construction costs. These challenges come on top of the most acute shortage of affordable housing, which is for lower-income renters.

Senator Ron Wyden (D-OR), a long-time supporter of the Low-Income Housing Tax Credit recently introduced legislation to create two new tax credits targeted to middle-income renters and first-time homebuyers. The Middle Income Tax Credit (MIHTC) Act of 2018 (S. 3365) would build on the Housing Credit’s proven model by allowing states to competitively allocate new tax credits to developers for the construction of housing, with at least 60 percent of a property’s units set-aside for households earning up to 100 percent of area median gross income (AMGI). The bill also includes protections for low-income affordable housing, including a provision that would transfer a state’s unused MIHTC allocation to the national Housing Credit pool, as well as a “Sense of the Senate” encouraging Congress to pass the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), which would expand the Housing Credit by 50 percent and set a minimum 4 percent Credit rate. Senator Wyden also introduced the First-Time Homebuyer Credit Act of 2018 (S. 3364), which would provide first-time homebuyers a refundable tax credit that would equal 2.5 percent of the home purchase, with a $400,000 cap (or a $10,000 credit) on the home’s price. The credit phases out for individuals with incomes above $80,000 ($160,000 for married couples filing joint returns) and for home values above $600,000.

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