Impact of Tax Reform and Jobs Act on Affordable Housing

Transcription

1 Impact of Tax Reform and Jobs Act on Affordable Housing 1

2 By Barbara Byrne Denham What does the future look like for the Affordable Housing market? Introduction There are close to 132,000 units of affordable housing in the U.S. that are in various stages of development. Nearly one-third of these planned units are at risk of not receiving the necessary financing now that the tax cut has reduced the incentive to buy tax credits that spur affordable housing. Accordingly, we have revised our forecasts for expected affordable housing construction to account for the reduced tax incentive. In New York City alone, close to 19,000 affordable units are in development stages accounting for 14% of the U.S. total affordable units either under construction or that have been permitted. This added affordable stock would house many that are cost burdened or below the poverty level. In the U.S., 46% of renters pay 30% or more of their income on housing costs. Of these, close to half earn less than $20,000 in income. Finally, 16% of all U.S. housing is occupied by those below the poverty level. Using the Reis database of affordable housing properties of 40 or more units along with affordable properties under construction or in planning phases, we highlight metro-level statistics on the affordable housing at risk of not seeing financing due to the recent tax cut from 35% to 21%. In addition, we include statistics from the American Housing Survey on income and subsidize housing as well as other housing cost data from Census to show how this new corporate tax change could impact each metro. In short, the tax reform bill s lower corporate tax rate could reduce the future supply of affordable housing that is desperately needed in every metro in the U.S., but more so in some than others. Barbara Byrne Denhan is an Economist in the research and economics department at Reis, the team responsible for the firm s market forecasting, valuation, and portfolio analytics services. Throughout her 20-year career, Barbara has written a number of white papers on the commercial real estate market. 2

3 Background The affordable housing industry is a distinct, niche property type in which a number of developers specialize as it provides tax credits to those seeking to minimize their tax bill. Most of the assistance for this industry comes from the low-income housing tax credits (LIHTC 1 ) that were created in the Tax Reform Act of In effect, these tax expenditures that accounted 2 for $6.7 billion in 2014 (see table below) are a quasi-government spending program that provides financial assistance (tax credits) to developers or corporations that then transfer them to build affordable housing. Table 1: Federal Spending 3 and Tax Expenditures for Low-Income Housing Assistance by Program 2000 and 2014 (in Billions of 2014 Dollars) Housing Choice Voucher Program and Project-Based Rental Assistance $23.05 $29.90 Public Housing $9.58 $6.55 Low-Income Housing Tax Credit $5.04 $6.70 Other Housing Programs $7.05 $8.15 Total Federal Spending and Tax Expenditures for Affordable Housing $39.68 $44.60 Source: Congressional Budget Office based on data from Office of Management and Budget, Budget of the U.S. Government, Fiscal Year [For more details see Recent Spending on Affordable Housing in Appendix A]. Although LIHTC was essentially created in 1986, affordable housing has had a long and complicated history. The idea of affordable housing was conceived after the Great Depression to house many with no income, job or home. Decades later, funding for affordable housing devolved to the state and local authorities in the 1970s when it became too costly at the federal level. Eventually, funding was transferred to private developers after 1986 with the passage of the Tax Reform Act. [see history of affordable housing in Appendix B.]. While some developers build new affordable housing using LIHTC, other developers acquire and modify and/or rehabilitate older properties under the program. Thus, the inventory of affordable properties included in the Reis database goes back to the late 1800s. The chart on the following page shows the history of the current stock of LIHTC properties by vintage. Note how affordable housing development soared during the housing boom but has recently decelerated. To put these numbers in perspective, our current affordable database includes 1.1 million units in 8,500 properties of 40 or more units in 110 metros; our apartment database includes 10.8 million units in market rate properties of 40 or more units in 82 metros as well as 1.8 million units in 195 tertiary markets. Thus, the affordable inventory is approximately 10% of the apartment inventory. 1 Under the LIHTC program a developer receives federal income tax credits over a 10-year period in exchange for acquiring, rehabbing or newly constructing rental housing for low-income households, and then operating the project under LIHTC guidelines for a certain compliance period. 2 and U.S. Congress Joint Committee on Taxation 3 Although LIHTC was authorized by federal law, and reduces federal taxes, administration of the program is handled by states. Each state has its own housing finance authority (HFA) that allocates credits to developers and handles all administrative and compliance matters. 4 Supplemental Materials, Public Budget Database Outlays (February 2015), and the staff of the Joint Committee on Taxation, Estimates of Federal Tax Expenditures Fiscal Year (various years), 3

4 Total LIHTC Units Built by Vintage Year 45,000 40,000 Total Units of LIHTC built 35,000 30,000 25,000 20,000 15,000 10,000 5, Source: Reis, Inc. Impact of Tax Reform and Jobs Act Development of affordable housing has thrived over the years as many have sought to buy tax credits to offset their tax liabilities. Now that the corporate tax rate has been cut from 35% to 21%, developers no longer need to offset taxes to the extent that they used to. While it is not conclusive that developers will altogether stop building affordable properties, it is safe to say that they will cut back and/or question its viability. According to a report from National Real Estate Investor 5, the prices of tax credits fell 10% following the 2016 presidential election as many market participants expected the Trump administration to lower corporate taxes. Following the passage of the Tax act, prices dropped another 4%. Like any asset, the prices for tax credits that grant the right to build affordable housing 6, moves with changes to supply and demand. In this case, demand for credits has declined as the cut to corporate tax rates reduces their appeal. Now that the corporate tax rate has been cut from 35% to 21%, developers no longer need to offset taxes to the extent that they used to For a detailed explanation of how affordable tax credits work please see the Reis paper on the subject at: 7 Includes properties with 40 or more units in 110 metros only. 4

5 The reduced affordable tax incentive will have a significant impact on the supply of affordable housing. Our current forecast for new affordable housing completions 7 shows 95,000 expected units in 2018 through However, another 37,000 units of affordable housing are in the planning stage, or have been permitted, while still more, 92,000 units, are in the proposed phase in that they have been mentioned in the press as development projects but they have not had a permit filed yet. Other than the units underway, many of the 129,000 units in the planning and proposed stages are at risk of not getting funded. The chart below shows how we have revised our affordable housing completion forecast. Also at risk are some of the 26,350 units of market rate apartments that are projected to be built within the affordable projects. [Many affordable developments combine some market rate units within their projects.] Affordable Housing Revised Construction Forecast Units 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Pre Tax Refore Post Tax Reform Source: Reis, Inc For a detailed explanation of how affordable tax credits work please see the Reis paper on the subject at: 7 Includes properties with 40 or more units in 110 metros only. 5

6 The table below lists the affordable units completed and projected by metro. These projections were revised to reflect lower expected completions in 2019 to 2021 due to the cut in corporate tax rate. In short, we have reduced our affordable housing construction forecast for 2019 to 2021 by 36,225 units. Table 2: Affordable Housing Projects Completed and Projected by Metro Metro Affordable Units Built from Affordable units Projected for Net Change in Forecast for Market Rate Units* built within New Affordable Properties Market Rate Units* projected within New Affordable Properties Albuquerque (153) Atlanta 762 1,342 (936) Austin 3,385 1,446 (328) 1, Baltimore 942 1,529 (494) 2, Buffalo (112) 0 0 Birmingham (134) 0 18 Boston 1,946 2,066 (542) 2,081 1,450 Chattanooga 0 82 (24) 0 0 Chicago 2,470 2,225 (557) Cincinnati (225) Central New Jersey 454 1,295 (764) Cleveland (137) Columbia (120) Charleston (130) Columbus (326) 0 0 Charlotte 822 1,285 (1,058) 60 0 Colorado Springs (303) 0 0 Dallas 2,114 1,534 (465) 1, District of Columbia 1,103 2,124 (1,047) 1, Denver 2,397 3,580 (756) 1, Dayton (66) 0 3 Detroit (168) Fairfield County (125) Fort Lauderdale (311) 0 0 Fort Worth 1,054 1,743 (331) Greenville (159) 0 0 Greensboro/Winston-Salem 935 1,016 (957) Houston 1,832 2,414 (2,114) Hartford (145) Indianapolis (473) Jacksonville (41) Kansas City (202) Knoxville (321) 0 0 Los Angeles 2,794 3,925 (1,224) 2,009 3,122 Long Island (70) Louisville 110 1,028 (473) 0 32 Little Rock 0 41 (39) 0 0 Las Vegas (72) Lexington 0 82 (78) 0 0 Memphis Miami 2,112 1,986 (1,229) Minneapolis 2,726 2,690 (1,444) *The market rate units are counted separately from the affordable units. When completed, the market rate units are included in the Reis apartment statistics. Source: Reis 6

7 Table 2: Affordable Housing Projects Completed and Projected by Metro Metro Affordable Units Built from Affordable units Projected for Net Change in Forecast for Market Rate Units* built within New Affordable Properties Market Rate Units* projected within New Affordable Properties Milwaukee (345) Nashville 373 1,396 (1,247) Norfolk/Hampton Roads (260) 80 0 Northern New Jersey 722 1,343 (877) New Haven (236) 6 12 New Orleans (304) 0 27 New York 9,688 12,141 (4,020) 13,913 9,680 Oakland-East Bay 1,173 1,495 (765) Orange County 1,547 1,251 (606) 522 1,185 Oklahoma City (77) 0 1 Omaha (74) 0 6 Orlando 1,680 1,150 (220) 0 23 Philadelphia 1,821 1,670 (151) Palm Beach (168) Pittsburgh Portland 1,474 2,090 (139) Providence (72) 0 11 Phoenix 1, (339) Raleigh-Durham 1, (488) Richmond (89) Rochester San Antonio 1,393 1,306 (668) San Bernardino/Riverside (440) 0 0 Salt Lake City 1, San Diego 2,116 1,099 (440) Seattle 4,074 3,096 (1,069) San Francisco 1,306 2,484 (721) San Jose 637 1,839 (455) 828 1,012 St. Louis Suburban Maryland 1, (104) Sacramento 402 1,242 (435) Suburban Virginia 1,206 1,016 (498) Syracuse Tampa-St. Petersburg (364) Tucson (46) 0 0 Tacoma (49) Tulsa (117) 0 96 Ventura County Wichita (4) 0 6 Westchester (186) Tertiary markets 5,128 6,220 (1,851) 1,306 0 Total 83,235 94,563 (36,225) 47,480 26,358 *The market rate units are counted separately from the affordable units. When completed, the market rate units are included in the Reis apartment statistics. Source: Reis 7

8 This housing is critical to every metro as a number of Americans are cost burdened 8 paying more than 30% of their household income on rent and utilities. According to Census data, 31% of U.S. households are cost burdened but as many as 46% of renters are cost burdened. Moreover, while the percent of total housing units that are cost burdened declined over the last six years, the percentage of rent-occupied housing that is cost burdened increased by 4% from 2010 to The increase was even higher in metropolitan areas: 6%. Some metros are far more cost burdened than others such as those in Florida, California and the New York metropolitan area as the table below shows. The table also highlights how many metros have a high ratio of low income renters those making below $20,000 per year that are cost burdened. Likewise, metros with high rates of cost-burdened households saw higher growth in this measure from 2010 to 2016 than metros with lower rates of cost-burdened households. Although, some of the growth was due to a disproportionate increase in renter-occupied housing units: 11.8% vs. 1.0% growth in owner-occupied housing units from 2010 to Table 3: Growth in Cost-burdened Households from Metro Percent of Renters on housing costs Percentage of Total on housing costs Percent of Renters earning less than $20,000 and on housing Increase in enters ( ) Increase in otal ( ) Miami 61% 48% 21% 25% -3% Fort Lauderdale 58% 43% 20% 20% -11% Palm Beach 56% 39% 20% 17% -11% Los Angeles 55% 47% 17% 6% -7% Ventura County 55% 41% 15% 9% -9% San Bernardino/Riverside 55% 42% 19% 13% -9% San Diego 55% 43% 16% 7% -7% Orange County 54% 42% 14% 8% -8% Long Island 54% 40% 16% -4% -16% New Orleans 53% 36% 21% 21% 4% Orlando 53% 39% 21% 15% -10% Fairfield County 53% 39% 15% 16% -13% Westchester 51% 40% 16% 3% -12% New York 51% 46% 15% 2% -2% Sacramento 51% 37% 18% -1% -15% Norfolk/Hampton Roads 51% 36% 18% 9% -10% Denver 50% 33% 17% 12% -6% Chattanooga 50% 31% 26% 18% 5% Rochester 50% 30% 23% 8% -8% Northern New Jersey 49% 42% 15% 7% -10% Las Vegas 49% 37% 21% 10% -10% Central New Jersey 49% 37% 17% 9% -13% Richmond 49% 31% 19% 14% -9% Albuquerque 49% 31% 23% 6% -8% Tampa-St. Petersburg 48% 33% 20% 11% -15% Colorado Springs 48% 32% 20% 13% -6% Oakland-East Bay 48% 37% 12% 3% -13% New Haven 48% 37% 19% -6% -18% Memphis 48% 33% 21% 11% -11% Portland 48% 34% 18% 4% -12% Suburban Maryland 48% 34% 14% 3% -14% 8 Percentage of household income spent for mortgage costs or gross rent. According to HUD programs, households spending more than 30 percent of income for these housing costs are considered to be "cost-burdened." Households spending more than 50 percent are considered to be "severely cost-burdened." 9 Gross rent is the contract rent plus the estimated average monthly cost of utilities (electricity, gas, and water and sewer) and fuels (oil, coal, kerosene, wood, etc.) if these are paid by the renter (or paid for the renter by someone else). Source: Census 10 Includes Gross rent (above) for renters and selected monthly owner costs for owner-occupied units. These are the sum of payments for mortgages, deeds of trust, contracts to purchase, or similar debts on the property (including payments for the first mortgage, second mortgages, home equity loans, and other junior mortgages); real estate taxes; fire, hazard, and flood insurance on the property; utilities (electricity, gas, and water and sewer) 8

9 Table 3: Growth in Cost-burdened Households from Metro Percent of Renters on housing costs Percentage of Total on housing costs Percent of Renters earning less than $20,000 and on housing Increase in enters ( ) Increase in otal ( ) Tacoma 48% 35% 19% 1% -15% Philadelphia 47% 34% 17% -1% -13% Tucson 47% 32% 19% 1% -11% Hartford 47% 32% 17% 6% -14% Milwaukee 47% 36% 19% -4% -15% Atlanta 47% 32% 19% 15% -15% Detroit 47% 30% 19% 3% -20% Houston 47% 32% 20% 25% 4% Chicago 47% 35% 17% 1% -17% Boston 47% 35% 13% 3% -9% Providence 46% 36% 19% 4% -14% San Jose 46% 36% 9% 9% -9% Lexington 46% 29% 18% -4% -11% San Antonio 46% 32% 20% 13% 4% District of Columbia 46% 37% 12% 13% 1% Indianapolis 46% 28% 23% 6% -7% Columbia 45% 28% 20% 1% -9% Charleston 45% 33% 17% -4% -8% Austin 45% 32% 17% 0% -5% Little Rock 45% 30% 23% 6% -3% Greenville 45% 29% 23% 8% -11% Baltimore 45% 31% 14% -5% -16% Fort Worth 45% 30% 20% 4% -8% Cleveland 45% 30% 21% 3% -18% Phoenix 45% 31% 19% 6% -13% Buffalo 45% 27% 20% -8% -14% Suburban Virginia 45% 30% 11% 20% -6% Jacksonville 44% 31% 19% 6% -14% Omaha 44% 28% 21% 12% -4% Minneapolis 44% 27% 18% 2% -18% Seattle 44% 33% 12% 5% -13% Dayton 44% 27% 21% -3% -20% Syracuse 43% 27% 19% -13% -19% Raleigh-Durham 43% 27% 18% 11% -9% Birmingham 43% 26% 18% -8% -23% Charlotte 43% 30% 20% 12% -12% Columbus 43% 29% 19% 1% -13% Dallas 42% 31% 19% 11% -3% Oklahoma City 42% 27% 22% 7% -6% Louisville 42% 27% 23% 2% -15% Nashville 42% 28% 19% -1% -13% Greensboro/Winston-Salem 42% 25% 22% 5% -15% Cincinnati 42% 27% 19% -1% -17% Wichita 42% 25% 27% -7% -17% Tulsa 42% 27% 20% 8% -11% St. Louis 42% 26% 20% -7% -18% Salt Lake City 41% 25% 18% -4% -19% San Francisco 41% 36% 10% -6% -13% Kansas City 41% 25% 19% 13% -7% Knoxville 40% 25% 23% -3% -13% Pittsburgh 40% 25% 19% -6% -12% Metro Average 48% 35% 18% 6% -10% 9

10 In addition, most of these high cost-burdened areas suffer from a lack of affordable housing. The table below from the American Housing Survey of 2013 shows the disparity in the supply of affordable housing across these selected metros. Many metros in Florida, in particular, suffer from a lack of affordable housing. This table also includes Census figures on the ratio of affordable housing that are occupied by those below poverty levels in the respective metros. In every metro listed, the ratio of affordable units occupied by those below poverty is below 10%. In short, the demand for affordable housing is nearly universal and somewhat proportionate to the total housing stock, yet the supply of affordable housing is not proportionate to housing. Thus, not only is the continued construction of affordable housing critical for cost-burdened households, but any reduction in future affordable development will hurt those below the poverty level more so than any other demographic. Table 4: Affordable Housing Supply and Poverty Statistics by Greater Metro Area Metro Area 11 Percent of all Housing Units that Qualify as "Affordable 12 " Percent of all Housing Units that Qualify as "Affordable 12 " and are occupied by HH below poverty Housing units Occupied by Households Below Poverty Level (in 000s) Percent of Total Housing Units occupied by those Below Poverty Level 13 Austin-Round Rock, TX AHS Area 4.9% 2.1% % Baltimore, MD AHS Area 6.6% 3.1% % Boston, MA AHS Area 11.5% 5.3% % Chicago, IL AHS Area 6.0% 3.0% % Detroit, MI AHS Area 6.6% 3.1% % Hartford, CT AHS Area 8.9% 4.5% % Houston, TX AHS Area 4.8% 2.5% % Jacksonville, FL AHS Area 6.7% 2.8% % Las Vegas-Paradise, NV AHS Area 4.6% 2.1% % Louisville, KY-IN AHS Area 6.6% 3.5% % Miami-Ft. Lauderdale-Hollywood, FL AHS Area 5.5% 2.9% % Minneapolis-St. Paul, MN-WI AHS Area 6.3% 3.0% % Nashville-Davidson-Murfreesboro, TN AHS Area 5.4% 3.1% % New York, NY AHS Area 22.4% 8.6% % Northern New Jersey, NJ AHS Area 8.4% 3.9% % Oklahoma City, OK AHS Area 4.9% 3.0% % Orlando, FL AHS Area 7.6% 2.4% % Philadelphia, PA-NJ AHS Area 5.2% 3.1% % Richmond, VA AHS Area 5.1% 2.5% % Rochester, NY AHS Area 7.5% 4.2% % San Antonio, TX AHS Area 5.3% 3.0% % Seattle-Tacoma-Everett, WA AHS Area 5.6% 2.6% % Tampa-St. Petersburg, FL AHS Area 4.5% 2.4% % Tucson, AZ AHS Area 4.7% 2.5% % Washington-Arlington, DC-VA-MD-WV AHS Area 8.3% 3.3% % Selected Metro Total 8.6% 3.8% 4, % U.S. 7.1% 3.6% 18, % 11 Source Census: American Housing Survey-defined areas that may or may not align with Reis metro boundaries areas. For example, New York City AHS includes the city, Long Island, Putnam, Orange, Rockland and Westchester counties. 12 Affordable includes those owned by Public housing authorities; those included in government-assisted programs such as LIHTC, HUD Section 8, FHA Section 236 or other FHA rent supplement program; as well as any other properties that have subsidized rent based on income verification; or properties under local rent control or rent regulation. Source: Census American Housing Survey 13 The official poverty estimates and criteria are based on the Annual Social and Economic Supplement to the Current Population Survey (Census). 10

11 Conclusion The LIHTC program has successfully helped build or convert close to 700,000 affordable housing units since With the reduction of corporate tax rates enacted by the Tax Reform and Jobs Act, demand for these tax credits has dropped clouding the outlook for the affordable housing sector. Given these tax changes, our previous estimates for future new supply of affordable housing from 2019 through 2022 have been adjusted by 40%, in line with the tax cut (from 35% to 21%). The lower tax rate will reduce the incentive to build affordable housing and it will impact the expected construction of market rate units within these affordable projects as well. In our earlier paper 14 on the impact of the tax act, we addressed the impact of the act on the multifamily industry in that the doubling of the standard deduction will lower the incentive to buy a home, ceteris paribus, which will increase demand for apartments. Thus, higher demand for apartments could push developers to build more multifamily properties that would offset the potential market rate units at risk within the affordable projects. Nonetheless, the affordable units within these potential projects are sorely needed by many households below the poverty level and/or by those who are cost-burdened and qualify for affordable housing. The statistics included above clearly delineate metro level data on both the supply as well as the demand for affordable housing. The numbers show that the supply of affordable housing by metro is far more disproportionate than the demand for affordable housing which is universal, more in line with the housing stock and in all metros, considerably high Barbara Byrne Denhan is an Economist in the research and economics department at Reis, the team responsible for the firm s market forecasting, valuation, and portfolio analytics services. Throughout her 20-year career, Barbara has written a number of white papers on the commercial real estate market. Contact us for more information... Call us toll free (US) REIS (7347) Visit Reis, Inc Avenue of the Americas, New York, NY info@reis.com Reis, Inc. Any use of this document or portions thereof, including reproduction, modification, distribution or republication, without the prior written consent of Reis, is strictly prohibited.

12 Appendix A: Recent Federal Spending on Affordable Housing According to the Congressional Budget Office, in 2014, the federal government spent $50 billion in housing assistance specifically designated for low-income households. With the exception of temporary increases in 2010 and 2011 due to the American Recovery and Reinvestment Act of 2009 (ARRA) that was passed in the wake of the housing bust, federal spending on housing assistance has remained stable at about $50 billion annually (measured in 2014 dollars) since This assistance includes direct spending by the federal government, block grants or tax treatments. The chart below shows the growth in spending by type from 2000 to Federal Spending and Tax Expenditures for Low Income Housing: Congressional Budget Office (adjusted for inflation) Federal Spending (in billions) Spending Excluding ARRA Spending Under ARRA Tax Expenditures Tax Expenditures including LIHTC (in billions) Other Findings from the Congressional Budget Office s Federal Housing Assistance for Low-Income Households Report. > Three spending programs account for the majority of the assistance provided directly to low-income households: > The Housing Choice Voucher (HCV) program with $18 billion in spending in 2014 provides federally funded, portable vouchers that recipients use to help pay for housing they choose in the private market. > Project-based rental assistance (PBRA) with $12 billion in spending in 2014 provides for federally contracted and subsidized rent in designated buildings that are privately owned and operated including LIHTC properties. > Public housing at a cost of $7 billion in 2014 provides for federally subsidized rent in buildings that are publicly owned and operated. > In addition, the federal government provided about $8 billion in 2014 for other housing programs. Most of that was in the form of grants to state and local governments. > Currently, only about one-quarter 16 of the eligible low-income population receives housing assistance through federal spending programs. Households that receive assistance are generally required to pay 30 percent of their income toward their housing expenses, a threshold widely described as affordable. > The CBO estimates that the federal government provided $130 billion in 2014 for all households mostly through tax deductions for mortgage interest payments and property taxes. 15 According to the National Priorities Project, the Federal Government spent $61.5 billion on Housing and community in This accounted for 1.6% of the total $3.8 trillion federal budget. 16 Ibid 2018 Reis, Inc. Any use of this document or portions thereof, including reproduction, modification, distribution or republication, without the prior written consent of Reis, is strictly prohibited.

13 Appendix B: History of Affordable Housing in the U.S. (Sourced from the National Low Income Housing Coalition) The first federal effort to support housing was spurred by the Depression. In 1934, the Federal Housing Administration was created making home ownership affordable for a broader segment of the public with the establishment of mortgage insurance programs. In 1937, the U.S. Housing Act sought to create public housing for low income people that were living in squalid housing conditions. After World War II, migration from urban areas to the suburbs hurt cities and their budgets. Federal programs were developed to improve infrastructure and remove blighted areas. This often meant razing whole neighborhoods and housing, most of which was occupied by immigrants and people of color. Beginning in the late 1950s and continuing into the 1960s, Congress created a number of programs leveraging private investment to create new affordable rental housing in the form of low interest rates or other subsidies to incentivize private owners to buy or rehabilitate housing for low income residents. These private programs soared in the 1970s but they had expiration dates. Often, affordable units were lost or converted to market rate when contracts between HUD and private owners expired. In 1965, Congress elevated housing to a cabinet level agency of the federal government, creating HUD 17, which succeeded earlier housing finance agencies. Because the cost of operating public housing soon exceeded the revenue brought in from resident rents, HUD began providing subsidies to public housing agencies (PHAs) in the 1960s to bridge the gap between rent revenue and the maintenance costs. The Civil Rights Acts of 1964 and 1968 included housing provisions that were intended to prevent discrimination against members of protected classes in private or public housing. In 1969, Congress passed a rule limiting the percentage of income a public housing resident could be expected to pay for rent of 25% of income that was later raised to the 30% standard used today. In 1973, then President Nixon created a moratorium on the construction of new rental and homeownership housing by the major HUD programs. In 1974, the Housing and Community Development Act made significant changes to housing programs, with a focus on block grants and a shift in authority from the federal to local jurisdictions which was referred to as a devolution of authority. The same act created Section 8 rental assistance programs, and it created the Community Development Block Grant (CDBG) from seven existing housing and infrastructure programs. The Section 8 program provides rental subsidies for eligible tenant families or single persons residing in newly constructed, rehabilitated and existing rental and cooperative apartment projects. 18 Some private affordable housing owners deciding to opt out of the project-based Section 8 program starting in the 1980s and 1990s, but many housing advocates organized to preserve the stock of affordable housing. A series of changes in the 1970s including the deinstitutionalization of mental hospitals led to a visible increase in homelessness in the 1980s. This impelled Congress to pass the McKinney Act of 1987 (later renamed the McKinney-Vento Act) which created new housing and social service programs within HUD to address homelessness. 17 In addition to the U.S. Department of Housing and Urban Development (HUD), The U.S. Department of Agriculture (USDA) addressed the poor housing conditions of rural areas with the creation of the Resettlement Administration in 1935 which later became USDA s Rural Development Reis, Inc. Any use of this document or portions thereof, including reproduction, modification, distribution or republication, without the prior written consent of Reis, is strictly prohibited.

14 Appendix B: History of Affordable Housing in the U.S. (Sourced from the National Low Income Housing Coalition) The Tax Reform Act of 1986 included Low Income Housing Tax Credits (LIHTC), which provided tax credits to those investing in the development of affordable rental housing. It also allowed the use of private activity bonds for housing finance, authorizing the use of such bonds for the development of housing for homeownership, as well as the development of multifamily rental housing. The Cranston-Gonzales National Affordable Housing Act of 1990 (NAHA) created the Comprehensive Affordable Housing Strategy (CHAS), which prioritized housing needs for the allocation of various block grants. Cranston-Gonzales also created the HOME program, which provides block grants to state and local governments for housing. In addition, NAHA created the Section 811 program, which has provided production and operating subsidies to nonprofits for housing persons with disabilities. Housing advocates have pushed for the funding of the National Housing Trust Fund (NHTF), which was signed into law by President George W. Bush in 2008 as a part of the Housing and Economic Recovery Act, but the funds for the NHTF were not distributed until 2016 when $174 million was allocated to the states. In 2017, $219 million is available National Low Income Housing Coalition 2018 Reis, Inc. Any use of this document or portions thereof, including reproduction, modification, distribution or republication, without the prior written consent of Reis, is strictly prohibited.