A year ago, when the Main South Community Development Corporation looked to renovate some 80 housing units without losing their affordability, the agency accomplished that goal with two subsidies - a low-income housing tax credit and a private activity bond from MassDevelopment, which collaborates with communities around the state in stimulating economic growth.
These two subsidies, the low-income tax credit and the private activity bond, which allow states to borrow on behalf of private companies and nonprofits to lower their borrowing costs, have long been the backbone of the affordable housing market.
Understandably, Steve Teasdale, the executive director of the Main South CDC, was among the housing officials who were alarmed when the initial version of President Donald Trump’s tax reform law sought to eliminate private activity bonds.
Both subsidies were retained in the new tax law, however, bringing relief to housing activists but not entirely eliminating the threat the law poses for affordable housing.
According to Novogradac & Co., a national accounting and consulting firm, the tax reform law could still reduce the “future supply of affordable rental housing by nearly 235,000 over 10 years.”
“It’s the greatest shock to the affordable-housing system since the Great Recession,” Michael Novogradac, managing partner of Novogradac & Co., said last week in a New York Times article.
Propelling this reduction, according to Mr. Teasdale, is the change in the corporate tax rate from 35 percent to 21 percent in new tax law. This change indirectly impact the affordable housing market by reducing, by lowering the value of the tax credits corporations receive in return for their investments, he said.
“As result, you will probably see less demand for tax credits, which will result in the production of fewer housing units,” Mr. Teasdale said.
However, he believes that the trillion-dollar budget deficit that new tax law will incur presents the biggest threat to the affordable housing market, because in order to “offset some those annual deficits, the administration will have to make cuts in other programs.”
The Community Development Block Grant program and the HOME Investment Partnerships Program, both of which communities use to increase and improve affordable housing, are among the programs being targeted by the Trump administration, Mr. Teasdale said.
Michael Kane, director of the Massachusetts Alliance of HUD Tenants, said the fallout from the tax law will exacerbate the already growing pressure on the commonwealth’s rental market, in which low- and moderate-income residents are struggling to afford rental units.
Only a quarter of those who qualify for subsidized housing are getting it, while some 30 percent of those who currently have subsidized housing are living in sub-standard accommodations, he said.
Indeed, the Citizens' Housing and Planning Association ranks Massachusetts eighth in the country in income inequality and seventh as the least affordable state for renters.
Meanwhile, given the changes in the tax law, Mr. Kane said, there will be added incentive for the owners of affordable housing units whose subsidy contracts are about to expire not to renew those contracts.
The state and local communities must work together to prevent the diminution of existing affordable housing, he said, noting that lawmakers such as acting Senate President Harriette Chandler understand how much is at stake.
Ms. Chandler, who has been a steady advocate for affordable housing over her tenure, is currently sponsoring a bill called “An Act promoting housing and sustainable development.”
The bill, among other features, seeks to provide communities that opt in with incentives and tools they can use to better manage their housing stock.
Mr. Teasdale, noting that Worcester is among the 13 percent of Massachusetts communities that have met the state’s guideline requiring at least 10 percent of their housing stock to be qualified as affordable, said, "The city does understand the need to make housing affordable for residents.”
“You are not going to have a healthy city if people cannot afford to live here, or do not have any extra money to spend because they are paying it all on rent," he said.