Professor Vogel Urges Congress to Consider Tax Reform Impact on Affordable Housing
In a recent op-ed published by The Hill, John Vogel, an adjunct professor at the Tuck School of Business at Dartmouth College and an associate faculty director for the school’s Center for Business, Government & Society and whose research focuses on real estate, affordable housing, and social entrepreneurship, noted the lack of any viable replacement for the LIHTC program were it eliminated.
He argued that low-income housing tax credits are delivered “efficiently and used effectively.” He noted that when these tax credits become available, states receive applications from quality projects for double or triple the amount available. And these states can choose those projects that “provide the biggest bang for the buck.”
Another benefit he cited of housing financed through the Low Income Housing Tax Credit is the “strong, positive role played by private sector investors. Banks and corporations that invest make sure the projects they fund are well built and that the nonprofit and for-profit developers who build and renovate the housing are fully capable of maintaining the properties. They also make sure that the residents meet the income guidelines set out by the federal government. Essentially, the risk shifts from the government to the private sector. The government only pays if the project succeeds.”
He also noted how well the public-private structure works in response to state and local needs. According to a study published by the Office of the Comptroller of the Currency, for those affordable housing properties placed in service between 1997 and 2010, the foreclosure rate was less than one percent. “The housing stock funded with the tax credit has also been better built and better maintained than housing financed through other subsidy programs, in part because the returns to investors come over time rather than upfront,” stated Vogel.
He cautioned against ending a highly effective and important program prematurely. And until “a replacement has been presented, debated and tested, the Low Income Housing Tax Credit is the best funding mechanism we have.”