The House version of the tax bill, which passed earlier in November, would end the “private activity” bond tax exemption, commonly used by developers of affordable housing to finance projects, according to the Wall Street Journal.
This could dramatically slow down both the construction and renovation of affordable housing units, with an analysis by accounting firm Novogradac & Co. finding that the bill would lower affordable housing production by about 700,000 units over the next 10 years.
The Senate bill does not eliminate this tax exemption, but Republican supporters of the House bill say that several exemptions are necessary to finance tax cuts for personal and corporate rates. The Joint Committee on Taxation estimated that eliminating the private activity bond exemption would generate $38.9 billion worth of additional tax revenue over 10 years.
Building and preserving affordable housing in New York has been a central component of Mayor Bill de Blasio’s agenda since he took office. The mayor initially pledged to build or preserve 200,000 affordable units by 2024 but recently upgraded his plan to build 300,000 units by 2026.
The GOP tax plan could have massive impact on several sectors of the real estate market, with potential effects including an increase in homeownership costs and lower taxes on the profits of commercial property owners. [WSJ] – Eddie Small