The House bill maintains a tax subsidy for low-income housing construction, but ends the tax-free status of certain bonds that builders rely on to arrange financing.
Developers say the mere threat of the policy change already has them scrambling to close deals for upcoming projects before the end of the year, when funding could disappear.
Chris Akbari, president the Itex Group, a development company in Texas, said his firm is in the process of closing a $49 million deal to buy and rehabilitate a low-income apartment complex in Houston.
“We might not be able to close in time,” Akbari said.
The tax subsidy is one of several seemingly random items targeted in the House tax plan, such as deductions for medical expenses, student loan interest and certain moving expenses, that Republicans included less out of ideology than a desire to simplify the tax code ― and a need for money.
The House bill cuts $3 trillion in taxes on businesses and individuals, and replaces half of that lost revenue through the elimination of various deductions. Among the items on the chopping block are $38 billion in what are known as “private activity bonds,” or tax-free local government loans for private enterprises that serve the public interest, like airports, waste disposal facilities and affordable housing.
“We have a lot of items that were put in our current tax code in order to incentivize people to do certain things,” Rep. Mike Kelly (R-Pa.), a member of the tax-writing Ways and Means Committee, told HuffPost. “And now, in order to get the rates lower, we’re looking at those again and saying, ‘Well, maybe we’re going have to do away with some of these.’”
The Senate tax bill doesn’t have the same provision, which is one of the smaller differences between the two bills. Ultimately, if tax reform is going to reach the president’s desk, the House and Senate will have to agree on one bill, most likely a compromise version hammered out in a conference committee with lawmakers from each chamber.
“We’re gonna go to conference and we’ll see what comes out of there,” Kelly said.
The House tax bill nominally preserves the Low Income Housing Tax Credit, a $9 billion subsidy for the rehabilitation and construction of affordable housing. Some of the credits are paired with tax-free government bonds and issued by states to developers, which can then sell the tax credits to investors in order to obtain additional financing for qualified projects. However, without the bonds, which the House bill would kill, the credit would be useless for some projects.
“This will have a severe impact on the construction and preservation of affordable homes throughout the country,” Diane Yentel, president of the National Low Income Housing Coalition, said in a statement earlier this month. Novagradac, an accounting and consulting firm that specializes in real estate, estimated that the bill would result in about 80,000 fewer new and rehabilitated affordable housing units per year.
The housing credit has plenty of critics. The libertarian Cato Institute argues the subsidy mainly benefits developers and investors. “The program has complex administration, is prone to abuse, and produces costly low-income housing,” Cato’s Chris Edwards and Vanessa Brown Calder wrote earlier this month. An investigation by NPR and Frontline found that the program creates fewer affordable units and at greater cost than it did 20 years ago.
The impact of losing the subsidy on housing policy is probably dwarfed by another big change in both the Senate and House versions of tax reform. Both bills essentially gut a deduction that allows homeowners to reduce their taxable income by the amount they pay in interest on their mortgages.
The mortgage interest deduction, along with deductions for state and local taxes, are tax expenditures worth more than $100 billion annually ― making them the largest plank of U.S. housing policy in terms of dollars, by far. Eliminating the mortgage subsidy would knock home prices down 10 percent, according to a study commissioned earlier this year by the National Association of Realtors, which opposes the tax plan.
Diana McIver, another Texas developer, said she’s afraid she’ll lose financing for a proposed senior-living complex in Austin. She has asked the investor and the bond issuer to try to speed up a closing that had been planned for early next year.
“If we can close by Dec. 31, we’re fine, but if we can’t, and they do away with private activity bonds, then we’re totally out of luck,” McIver said. “Quite frankly, I am not sure that the members of the House of Representatives really understand the relationship between private activity bonds and affordable housing.”
Sen. Richard Blumenthal (D-Conn.) talks with Sen. Elizabeth Warren (D-Mass.) before the start of a Senate Armed Services Committee hearing concerning the roles and responsibilities for defending the nation against cyberattacks, on Oct. 19, 2017.
With Liberty And Justice...
Members of Code Pink for Peace protest before the start of a hearing where U.S. Attorney General Jeff Sessions will testify to the Senate Judiciary Committee in the Hart Senate Office Building on Capitol Hill on Oct. 18, 2017. Committee members questioned Sessions about conversations he had with President Donald Trump about the firing of former FBI Director James Comey, the Deferred Action for Childhood Arrivals (DACA) policy, the ongoing investigation about Russian interference in the 2016 presidential election and other subjects.
Whispers
Sen. Richard Burr (R-N.C.), right, speaks with Sen. Mark Warner (D-Va.) before a confirmation hearing for Christopher Sharpley, nominee for inspector general of the CIA, on Oct. 17, 2017.
Not Throwing Away His Shot
Lin-Manuel Miranda, creator of the musical "Hamilton," makes his way to a meeting of the House Appropriations Subcommittee on Interior, Environment and Related Agencies in the Rayburn Office Building during a round of meetings to urge federal funding for the arts and humanities on Sept. 13, 2017.
Medicare For All
Sen. Bernie Sanders (I-Vt.), center, speaks on health care as Sen. Richard Blumenthal (D-Conn.), left, and Sen. Kirsten Gillibrand (D-N.Y.), right, listen during an event to introduce the Medicare for All Act on Sept. 13, 2017.
Bernie Bros
Supporters of Sen. Bernie Sanders (I-Vt.) pack his office on Sept. 8, 2017. Members of the "Draft Bernie for a People's Party" campaign delivered a petition with more than 50,000 signatures to urge the senator to start and lead a new political party.
McCain Appearance
Sen. John McCain, second from left, leaves the Capitol after his first appearance since being diagnosed with cancer. He arrived to cast a vote to help Republican senators narrowly pass the motion to proceed for the replacement of the Affordable Care Act on July 25, 2017.
A Narrow Win
Senate Majority Leader Mitch McConnell, center, speaks alongside Sens. John Barrasso, left, John Cornyn, right, and John Thune, rear, after the Senate narrowly passed the motion to proceed for the replacement of the Affordable Care Act on July 25, 2017.
Kushner Questioning
Jared Kushner, White House senior adviser and son-in-law to President Donald Trump, arrives at the Capitol on July 25, 2017. Kushner was interviewed by the House Intelligence Committee in a closed-door meeting about contacts he had with Russia.
Hot Dogs On The Hill
Rep. Frank Lucas (R-Okla.) prepares a hot dog during the American Meat Institute's annual Hot Dog Lunch in the Rayburn Office Building courtyard on July 19, 2017.
And Their Veggie Counterparts
Rep. Jackie Speier (D-Calif.) visits the People for the Ethical Treatment of Animals veggie dog giveaway on July 19, 2017, countering a National Hot Dog Day event being held elsewhere on Capitol Hill.
Poised For Questions
Callista Gingrich, wife of former House Speaker Newt Gingrich, waits for a Senate Foreign Relations Committee hearing on her nomination to be the U.S. ambassador to the Vatican on July 18, 2017.
Speaking Up
Health care activists protest to stop the Republican health care bill at Hart Senate Office Building on Capitol Hill on July 17, 2017.
In The Fray
Sen. Ted Cruz (R-Texas) speaks to members of the media after announcing the revised version of the Senate Republican health care bill on Capitol Hill on July 13, 2017.
Anticipation
Christopher Wray is seated with his daughter Caroline, left, as he prepares to testify at a Senate Judiciary Committee confirmation hearing on his nomination to be the next FBI director on July 12, 2017.
Up In Arms
Health care activists protest to stop the Republican health care bill at Russell Senate Office Building on Capitol Hill on July 10, 2017.
Across A Table
Speaker of the House Paul Ryan (R-Wis.) meets with South Korean President Moon Jae-in on Capitol Hill on June 29, 2017.
Somber Day
House Minority Leader Nancy Pelosi (D-Calif.) speaks about the recent attack on the Republican congressional baseball team during her weekly press conference on Capitol Hill on June 15, 2017.
Family Matters
Rep. Joe Barton (R-Texas), right, and his sons, Jack, 10, and Brad, arrive in the basement of the Capitol after a shooting at the Republican baseball practice in Alexandria, Virginia, on June 14, 2017.
A Bipartisan Pause
Rep. Joe Barton (R-Texas), right, coach of the Republican congressional baseball team, tells the story of the shooting that occurred during a baseball practice while he stands alongside Rep. Mike Doyle (D-Pa.), left, a coach of the Democratic congressional baseball team on June 14, 2017.
Hats On
Rep. Chuck Fleischmann (R-Tenn.) reacts about the shooting he was present for at a Republican congressional baseball practice in Alexandria, Virginia, as he speaks with reporters at the U.S. Capitol in Washington on June 14, 2017.
Public Testimony
U.S. Attorney General Jeff Sessions is sworn in to testify before a Senate Intelligence Committee hearing on Capitol Hill on June 13, 2017.
Comey's Big Day
Former FBI Director James Comey testifies before a Senate Intelligence Committee hearing on Russia's alleged interference in the 2016 U.S. presidential election on Capitol Hill on June 8, 2017.
Conveying His Point
U.S. Director of National Intelligence Daniel Coats testifies at a Senate Intelligence Committee hearing on his interactions with the Trump White House and on the Foreign Intelligence Surveillance Act on June 7, 2017.
Selfie Time
Vice President Mike Pence takes a selfie with a tourist wearing a "Make America Great Again" hat inside the U.S. Capitol rotunda on June 6, 2017. The vice president walked through the rotunda after attending the Senate Republican policy luncheon.
Budget Queries
Office of Management and Budget Director Mick Mulvaney testifies before the House Budget Committee about President Donald Trump's fiscal 2018 budget proposal on Capitol Hill on May 24, 2017.
Flagged Down By Reporters
Sen. Richard Burr (R-N.C.), chairman of the Senate Intelligence Committee, leaves a closed committee meeting on Capitol Hill on May 24, 2017. The committee is investigating possible Russian interference in the U.S. presidential election.
Shock And Awe
House Minority Leader Nancy Pelosi (D-Calif.) and Sen. Bernie Sanders (I-Vt.) hold a news conference on the release of the president's fiscal 2018 budget proposal on Capitol Hill on May 23, 2017.
Seeing Double
Sen. Dianne Feinstein (D-Calif.) arrives in the Capitol for the Senate Democrats' policy lunch on May 16, 2017.
Honoring Officers
President Donald Trump speaks at the National Peace Officers Memorial Service on the West Lawn of the Capitol on May 15, 2017.
Whispers
Senate Intelligence Committee Chairman Richard Burr (R-N.C.), right, and ranking member Sen. Mark Warner (D-Va.) talk during a hearing with the heads of the U.S. intelligence agencies in the Hart Senate Office Building on Capitol Hill on May 11, 2017.
Skeptical
Former acting Attorney General Sally Yates arrives to testify before a Senate Judiciary Committee hearing on Russian interference in the 2016 U.S. election on Capitol Hill on May 8, 2017.
Differing Opinions
Rep. Glenn Grothman (R-Wis.) gives a thumbs-up to protesters on the East Front of the Capitol after the House passed the Republicans' bill to repeal and replace the Affordable Care Act on May 4, 2017. The protesters support the ACA.
Real Talk
United States Naval Academy Midshipman 2nd Class Shiela Craine (left), a sexual assault survivor, testifies before the House Armed Services Committee's Subcommittee on Military Personnel with (2nd from left to right) Ariana Bullard, Stephanie Gross and Annie Kendzior in the Rayburn House Office Building on Capitol Hill on May 2, 2017. Kendzior, a former midshipman, and Gross, a former cadet, were both raped twice during their time at the military academies. The academy superintendents were called to testify following the release of a survey last month by the Pentagon that said 12.2 percent of academy women and 1.7 percent of academy men reported experiencing unwanted sexual contact during the 2015-16 academic year.
In Support Of Immigrants
Congressional Hispanic Caucus Chair Rep. Michelle Lujan Grisham (D-N.M.), center, is joined by dozens of Democratic members of the House of Representatives to mark "Immigrant Rights Day" in the Capitol Visitor Center on May 1, 2017 in Washington, D.C. The Democratic legislators called on Republicans and President Donald Trump to join their push for comprehensive immigration reform.
Former NBA guard Darius Morris has died at the age of 33. He played for five teams during his four NBA seasons. Morris played college basketball at Michigan.
Affluent Americans may want to double-check how much of their bank deposits are protected by government-backed insurance. The rules governing trust accounts just changed.
It’s key to note that we’re not saying the “best team” or “best roster.” Instead, we’re talking about the best confluence of factors that can outline a path for survival and then success.
Jake Mintz & Jordan Shusterman discuss the Padres-Marlins trade that sent Luis Arraez to San Diego, as well as recap all the action from this weekend in baseball and send birthday wishes to hall-of-famer Willie Mays.
Miami Heat president Pat Riley rebuked comments Jimmy Butler made about the Boston Celtics and New York Knicks, while also implying that his star needs to play more.
An annual government report offered a glimmer of good news for Social Security and a jolt of good news for Medicare even as both programs continue to be on pace to run dry next decade.
Once named the “Most Likable Person in the World,” the actor is under fire in a new report, accused of showing up to work late on the film “Red One,” irritating the crew and causing the budget to balloon.
