As a federal tax overhaul bill moves toward passage, Peninsula affordable housing advocates are seeing one glimmer of hope in the language. A variety of tax subsidies crucial for low-income housing are being preserved in the final version of the law despite threats to end them.
Affordable housing advocates last week were worried the Republican tax plan would have entirely eliminated low-income housing tax credits. This program, established under the Reagan administration, encourages private investment in below-market-rate housing by granting lucrative tax write-offs.
Since its establishment, the tax credits have become the cornerstone for financing affordable housing, helping build 3 million homes across the country, including more than 8,700 on the Peninsula.
By last week, both Republican-led chambers of Congress had passed different tax bills, and work began on reconciling the two versions. The House version called for eliminating the tax-credit program entirely, prompting an outcry by housing advocates at the national and local level.
In an example close to home, the affordable housing developer Palo Alto Housing has three new low-income housing projects in Mountain View that will rely on financing through federal tax credits. Those new projects include plans to redevelop a Taco Bell at 950 El Camino Road into a 70-unit apartment complex.
Palo Alto Housing is also pursuing projects at two unspecified sites in the Terra Bella neighborhood that could result in up to 170 affordable units.
These projects would have been severely hindered if the tax-credit subsidies were brought to a end, said Palo Alto Housing executive director Candice Gonzalez.
"This would have meant losing one of our main funding sources -- you would have seen a halt to most of our affordable housing development," she said. "We would have had to rethink all of our projects and find new sources of funding."
If the tax credits were eliminated, it would have meant that about 900,000 fewer affordable homes would be built over the next decade, according to the Novogradac & Company accounting firm.
But even with tax credits remaining intact, the program is taking a hit: The value of these credits has plummeted for months as potential investors have anticipated a hefty reduction in the 35 percent corporate tax rate following the election of President Trump. That sudden loss of value nearly derailed a 67-unit affordable housing project at 1701 El Camino Real.
As of Monday, the latest version of the bill calls for reducing this tax rate to 21 percent.
Taken altogether, the tax reform bill benefits the nation's wealthiest citizens and does little to help citizens struggling for shelter, said Diane Yentel, president of the National Low Income Housing Coalition.
"We should be increasing investments in solutions to the housing crisis impacting low-income people across the country," she wrote. "This bill will exacerbate our country’s already yawning income inequality and will harm efforts to end homelessness and housing poverty."