Lawmakers in Washington are holding the fate of funds for low-income housing in their hands, and local government and non-profit housing providers are worried about the outcome.
Mortgage revenue bonds, the funding method used to provide mortgage money to first-time homebuyers with limited incomes, was eliminated from recent budget proposals.
Low-income housing tax credits, used to develop rental housing, could be suffering the same fate if its one-year extension proposals fall through.
The authority to issue new mortgage revenue bonds expired at the end of September. Although Maryland still has some money left over from bonds sold during the summer, that money will soon be exhausted, said William Beans, director of homeownership programs for the Community Development Administration of the Maryland Department of Housing and Community Development.
Without funding extensions in the federal budget, "loans to first-time homebuyers purchasing a modest house will come to a crashing halt," says Mr. Beans.
"Without the tax credit, we would be stymied," predicted F. Barton Harvey III, deputy chairman of The Enterprise Foundation, a Columbia-based non-profit organization that works with more than 100 neighborhood organizations to provide housing and employment opportunities for low-income people.
"It's no question that it [tax credits] is one of the most important resources for non-profit housing providers," Mr. Harvey said.
Maryland has been making 4,000 home loans totaling $200 million each year to low-income homebuyers. "Without the mortgage revenue bond extension, we will have one-quarter of that amount to lend," Mr. Beans stated. "We're essentially out of money now. In February or March, we were planning to issue more bonds."
"Without MRB's and low-income tax credits, affordable housing will be dealt a serious blow," Mr. Beans predicted. "These are the only two games in town."
"We feel more secure about getting tax credit extenders in the budget [than mortgage revenue bonds]," said Barbara Thompson, director of government affairs for the National Council of State Housing Agencies -- a Washington-based organization that administers mortgage revenue bonds in every state and administers the tax credit program in 47 states, including Maryland.
Along with the overwhelming general support for housing in Congress, Ms. Thompson pointed out that 15 of 20 members of the Senate Finance Committee, and 23 of 36 members of the House Ways and Means Committee all co-sponsored legislation to extend low-income housing funds in this session of Congress.
Even with that support, Ms. Thompson and her organization has continued lobbying House and Senate committee members for housing funds. "We're optimistic, but our fate is in their hands."
"Without the [low-income housing tax] program, there would be little or no housing for poor people. It's the poorest of the poor who rent," Mr. Harvey said. Low-income housing tax credits are the most highly targeted housing program. "Every unit of those 125,000 serves a family that is below 60 percent of the median U.S. income," he said.
"We're fighting like crazy, the tax credits are the only game in town," Mr. Harvey said. By using the tax credits, more than $140 million was raised in the last three years for non-profit housing projects worth $350 million, to create 5,000 housing units. "We're working in the worst areas of cities with the worst problems," Mr. Harvey added.
He predicted that it would be disastrous for the 13 million people who earn less than $10,000 annually if the federal government eliminated the housing funds. Most of these people, Mr. Harvey said, are already spending more than 50 percent of their income on rent. "That leaves them $15 per day for all expenses. They are the near-homeless."
Low-income housing tax credits were created by the 1986 Tax Reform Act. It authorized more than $300 million each year for 10 years to be used fund low-income housing. Only funds used in each year were given out, and none of the money could be carried over to the next year.
The rental housing provided from the tax credits is the only method to create new housing for very low income people, Mr. Harvey said. In 1987, the first year, only 19 percent of the available money was used. In 1988 that figure grew to 68 percent, and last year 97.5 percent of the available money was used to produce 125,000 units of housing.
Mr. Harvey pointed out that during the last 10 years, housing allocations were cut by 75 percent, and housing was the most severely cut of any domestic program.
The Republicans held it hostage last year, and only renewed it for a short time by attaching it to the capital gains tax, Mr. Harvey said. Capital gains are the profits from the sale of assets, which are currently taxed at the same rate as earned income.
"It's ironic that the low-income tax credit was held hostage to the capital gains tax reduction, and it's happening again this year."