Trump’s proposed tax overhaul puts affordable housing in jeopardy

Developers say some projects are already falling over

TRD New York /
Mar.March 22, 2017 10:20 AM

Donald Trump and the Ingersoll Senior Residences (Credit: Getty Images and Marvel Architects)

President Trump’s proposed tax code changes — which could reduce the corporate tax rate from 35 percent to 15 percent — are slowing down private investment in affordable housing projects.

The affordable housing industry is worth around $10 billion and represents about one-quarter of all new apartment construction in the United States, the Wall Street Journal reported. The industry relies on Low Income Housing Tax Credits for money, which often determines if a project gets completed. However, with a possible tax cut in the cards, offsetting income taxes by funneling money into affordable housing is becoming less and less attractive to investors. In January, The Real Deal highlighted the dangers to the program, which helped finance more than 102,000 low-income housing units in New York State (mostly in New York City) between 2005 and 2014.

Developers told the Journal that tax-credit values are down by 10 to 20 percent since Trump’s election win. Investors have even withdrawn support for some low-income housing that is already underway.

The Ingersoll Senior Residences in Fort Greene, for example, which is being developed by BFC Partners, is facing a significant funding gap, according to the newspaper. The $47 million project is set to bring 145 affordable units for people aged 62 and older.

“Some of the deals are just dying,” Stuart Boesky, the chief executive of Pembrook Capital Management, a lender specializing in affordable housing, told the Journal. “Some of the deals are scrambling around looking for gap grants from state and local housing agencies.” Most likely, there will be $1 billion to $1.5 billion less equity investment in affordable housing in 2017, thanks to the reduction the credit’s value, accounting firm Novogradac & Company said.

The tax credit was signed into law in 1986 to spur private investment in affordable housing. Senator Maria Cantwell, a Democrat from Washington, is proposing legislation that would offset the credit’s loss in value by expanding it by 50 percent. [WSJ]Miriam Hall

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