Republicans in the U.S. House of Representatives propose to eliminate a proven means of financing affordable housing in the Puget Sound region and around the country. Congress must come to its senses.
In the midst of a housing crisis, with rents escalating at record rates and working households being priced out of homes and apartments in the Puget Sound area, the U.S. House Republicans’ Tax Cuts and Jobs Act eliminates one of the most effective tools for developing affordable housing nationwide — private activity bonds, and the accompanying low income housing tax credits.
Administered locally by the Washington State Housing Finance Commission since 1987, this program has financed more than 24,000 affordable housing units in King County and Seattle alone by using $1.4 billion in bond proceeds to leverage $1.2 billion in private equity investment. Statewide, more than 54,000 affordable apartment units have been built using this tool. Elimination of the program would cancel more than 2,000 affordable units planned for development across Washington state next year.
The private activity bond program was created as a part of the bipartisan Tax Reform Act of 1986 enacted during the Reagan administration and has long been viewed as a success, inducing private-sector investment in an important public good — affordable housing.
The program has had longstanding support from both sides of the political aisle but is now a prospective casualty, not because the program is ineffective, but only because the current tax bill’s authors are seeking funding that can be diverted to tax cuts for corporations and the wealthy. The House Republicans’ approach will effectively kill the development of nearly 1 million rental units of affordable housing nationwide over the next 10 years.
The local impact of this “tax reform” on new affordable housing in Seattle and King County would be devastating. If this legislation were enacted today, six privately-driven housing developments with more than 1,100 new affordable apartments — four in Seattle, one in SeaTac and one in Snoqualmie — would not happen. And another 1,000 units of housing that would have been financed by the end of 2018 also would never happen.
Another casualty would be the city of Issaquah’s 355-unit mixed-income transit-oriented development slated for construction next to the Issaquah Park and Ride and proposed Light Rail Station. This $100 million project — a partnership involving the city of Issaquah, a private developer and the King County Housing Authority — would catalyze community development in central Issaquah and leverage investments in public transportation.
The award-winning redevelopment of Yesler Terrace, where the Seattle Housing Authority is rebuilding 561 units for extremely low-income residents and adding 290 more units for others with low incomes, will not be able to continue. That’s $100 million of private equity in affordable housing that will be lost, along with an estimated 4,000 construction jobs. All of these projects are dependent on private activity bonds in order to proceed.
The tax package’s math is premised on the creation of jobs and increased economic activity. Ironically, the private activity bond program, unlike tax cuts, is a proven economic development tool which has created an estimated 39,000 living wage jobs, $2.8 billion in economic activity and $530 million in tax revenues in King County and Seattle.
Eliminating a proven and effective program that induces the private sector to invest in important community needs, creates jobs and stimulates the local economy is not rational. Additional affordable housing is needed in job centers in our region and around the country, and is a critical element of any job-creation strategy. Elimination of private activity bonds and housing tax credits will exacerbate the housing crisis. The Senate has recognized this and wisely proposed retaining these provisions in the tax code. The House’s approach is shortsighted on every level, one that will hurt millions of people in our country. With GOP-led passage of the House version last week, let’s reinforce to the Senate that this is not acceptable to America’s communities.