Study Says House Tax Plan Negatively Impacts Affordable Housing in NY

The Tax Cuts and Jobs Act (H.R. 1), which proposes the elimination of Private Activity Bonds, would cost the State of New York $4.5 billion in affordable housing investment annually, and 17,000 fewer affordable units would be built each year, according to an impact analysis recently released by the New York Housing Conference (NYHC), a nonprofit affordable housing policy and advocacy organization.

The organization’s statement drew attention to the focus on affordability for homeowners and real estate values in New York relating to changes to the Mortgage Interest Deduction (MID) and the State and Local Tax Deduction (SALT). However, it points out that this bill is also a bad deal for renters in need of affordable housing and will undermine the state and New York City affordable housing plans, costing New York $4.85 billion annually with the loss of 17,128 affordable homes each year. Furthermore, the impact of housing bond elimination would extend beyond the amount of affordable homes being developed and negatively impact New York’s economy.

According to NYHC, which combined city- and state-issuing agency data (which doesn’t include the number of homes financed with recycled bonds), this bill will cost affordable housing in New York annually:

• $2,014,745,000 in Tax-Exempt Private Activity Bond Financing [$1,271,745,000 (NYS), $743,000,000 (NYC)];
• $1,436,000,000 in 4 percent LIHTC Equity [$839,000,000 (NYS), $597,000,000 (NYC)];
• $83,400,000 in 9 percent LIHTC Equity (result of lower corporate tax rate) [$61,500,000 (NYS), $21,900,000 (NYC)];
• $611,455,000 in the Recycled Bond Program [$277,035,000 (NYS), $334,420,000 (NYC)];
• $346,097,300 in SONYMA Mortgages for Affordable Homeownership; and
• 17,128 affordable homes not financed annually [9,431 multifamily rental (NYS); 5,800 multifamily rental (NYC); 1,897 affordable homes not purchased (NYS)].

To get a sense of how these numbers compare to affordable housing production, one-third of all affordable housing created or preserved in New York City’s affordable housing plan is financed with Private Activity Bonds and the 4 percent Housing Credits they generate. And 85 percent of LIHTC developments in the city use bond financing and 4 percent credits.

NYHC also points out that disaster-impacted areas across the U. S. will lose critical financing for housing recovery. In New York, Private Activity Bonds were important for rebuilding public housing in the aftermath of Hurricane Sandy, such as at Ocean Bay (Bayside) in the Rockaways, which was flooded and where building systems were underwater. Approximately $213 million in Private Activity Bonds were used in conjunction with HUD’s RAD program to leverage private investment to relocate the building’s heating system, protect residents and infrastructure from water penetration, and rehabilitate 1,400 apartments in need of basic improvements. HUD and FEMA funding on their own were not sufficient to meet the capital needs of this storm-ravaged project. Other multifamily housing in disaster-impacted areas will be in the same situation requiring Private Activity Bonds.

NYHC argues that residents of public and affordable housing in other storm-battered regions should be afforded the same resources for recovery. In 2016, Texas used $580 million in Private Activity Bonds for multifamily housing and another $31 million for affordable homeownership. Texans’ needs are certainly heightened post-Hurricane Harvey, with officials estimating $9 billion is needed to assist in the short-term and long-term recovery of damaged single-family and multifamily housing stock in Houston. Similarly, Florida utilized $460 million in Private Activity Bonds for multifamily housing in 2016 and $92 million in affordable homeownership.