The last few years have been tough on state budgets. Figures released by the Center on Budget and Policy Priorities (CBPP) show that during fiscal years 2009, 2010 and 2011, states had a collective $430 billion budget shortfall. The CBPP estimates that fiscal year 2012 won't be much better, with a combined shortfall of nearly $125 billion. With such large gaps to fill, state governments are considering cuts to every program - including housing-related tax credits.
For the last few months, California has been getting most of the attention where affordable housing policy is concerned. But California Governor Jerry Brown isn't the only state leader with plans to reduce housing funding. Missouri, which already cut its historic tax credits program nearly in half, is considering legislation that would limit housing projects to just one type of tax credit. In other words, if a developer opted to use low-income housing credits, he would be prohibited from using historic credits for the same project. It's a move that could have serious repercussions for housing developers, who often use multiple sources of funding to move their projects forward. In order to offer homes or apartments at below-market rates, developers need to off-set their costs as much as possible, and that goal is often achieved using multiple tax credit programs.
Another Missouri bill would ban tax credit recipients from making campaign contributions for the two years after credits were awarded. Similarly, anyone who makes campaign contributions is banned from receiving tax credits for two years after the last contribution was made. The bans apply, but are not exclusive, to all housing-related credits including low-income housing, brownfield redevelopment, and historic tax credits. Opponents of this measure believe it will simply lead to fewer campaign contributions by developers, rather than decreasing the amount of tax credit dollars allocated in any given year - which is supposed to be the goal of the bill.
Measures like these are deemed necessary by many state governments that need to close budget gaps and don't consider higher taxes a viable option. Housing programs are certainly not the only ones at risk, but people who work with and advocate for low-income residents worry that poorer residents will suffer the most as state governments search for solutions to their fiscal challenges.
Other states considering significant changes to their tax credit policies include New Jersey and Michigan. Developers and other affordable housing advocates are encouraged to contact state governments and express their support for these programs. Many are already talking with state legislators, trying to find alternative solutions or - at the very least - working to minimize cuts to these much-needed sources of housing funding.
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