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Press Release of Senator Cantwell
Cantwell Meets with Pierce County Housing Community to Discuss the Benefits of Affordable Housing Program
Senator to author new bipartisan bill to spur development in affordable housing and support construction jobs
Friday, August 26,2011
WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) participated in a forum in Tacoma on continuing the growth of affordable housing in Washington state. Cantwell plans to introduce a bill that would help spur investment in the development of affordable housing and support construction jobs nationwide. Cantwell’s bill would eliminate the uncertainty and financial risk of the current floating rate system that is used by the Low Income Housing Tax Credit program to determine credit allocations for certain affordable housing projects.
This year, affordable housing projects in Washington state are being developed in King, Kitsap, Stevens, Whatcom, Spokane, Pierce, and Yakima counties. These housing projects provide a combined 914 housing units and, using calculations from an industry recognized National Association of Home Builders Report, support more than 1,300 jobs.
The Low Income Housing Tax Credit (LIHTC) helps finance 90 percent of affordable housing projects in the United States. Since the program was created in 1986, it has helped finance more than two million affordable apartments nationwide, including nearly 50,000 in Washington, and has created 140,000 construction jobs annually.
“Affordable housing continues to be a major concern and challenge across our nation and here in Washington state,” said Senator Cantwell. “By helping to spur investment in affordable housing development, we stimulate our local economy and lessen the impact of the tough economic times on our most vulnerable populations. This bill will help projects move forward that provide much-needed homes for Washington families and create construction jobs.”
Currently, low-income housing tax credit allocations are calculated by weighing the cost of the project against the cost of borrowing by the federal government. With today’s very low interest rates, that produces very low tax credit allocations per project. In effect, lower federal borrowing rates reduce the amount of LIHTC allocations supporting affordable housing development, thereby imposing more financial risk on the developer.
Federal Reserve Chairman Ben Bernanke announced on August 9th that the Federal Reserve intends to keep interest rates exceptionally low through mid-2013. Cantwell’s bill would guarantee a certain credit allocation for projects across Washington state and the nation even as federal interest rates remain low, ensuring affordable housing projects can receive the credit support they need to continue.
“Not only is the Housing Credit the primary financing tool for affordable housing development nationwide, but housing development means construction and construction means jobs,” said M.A. Leonard, Vice President and Market Leader, Pacific Northwest, Enterprise Community Partners, Inc. “In 2011, the Commission has allocated all of its available $14.1 million in annual Housing Credit authority to 14 affordable housing projects. In addition to the extremely affordable rent levels, serving special needs populations, including homeless veterans, the 914 units created will translate into an anticipated 1,380 jobs in communities across the state.”
“We applaud Senator Cantwell for long supporting the Housing Tax Credit program,” said Kim Herman, Executive Director of the WSHFC. “Her bill to improve the program will provide certainty to developers regarding the value of their credit that is an important step in today’s economic turmoil. In Washington state, the Housing Credit Program has helped create more than 58,000 units of affordable housing. It is the most effective financing program available. Without these units, our state would have a severe shortage of affordable units for working families that need a decent place to live.”
The Low-Income Housing Tax Credit (LIHTC), the nation’s primary mechanism for developing affordable rental housing, is a permanent fixture of the tax code that provides a 70 percent subsidy for the development of affordable rental housing. States leverage this funding to attract private investment and move forward on housing projects. The effectiveness of the tax credit was severely hampered by the economic downturn in 2008 and 2009. The value of the credits depends on demand by the large corporate investors, and in the slumping economy, that demand dropped sharply. These large corporate investors included Fannie Mae and Freddie Mac. As a result, funding gaps arose, and tens of thousands of housing units stalled for lack of private investment capital.
To address the lack of private capital due to the economic downturn, Senator Cantwell passed a one year Tax Credit Exchange Program in 2009. The Exchange makes it easier for states to access the needed capital to move forward on stalled housing construction projects. The Exchange allowed states to receive a direct payment in lieu of a tax credit. Because of the Exchange, Washington state has been able to go forward with 21 projects representing 971 housing units. Together, these projects support thousands of jobs in at least 16 communities across the state and constitute a total investment of $96.7 million.
On April 9, 2010, during a visit to Bakhita Gardens, an affordable housing development project in Seattle, Cantwell called for an extension of the LIHTC Exchange. Cantwell fought to have the Exchange extended for an additional year with passage of the American Workers, State and Business Relief Act (AWSBRA), but the measure died when the House of Representatives failed to take it up before the 111th Congress adjourned.