Affordable housing advocates are worried President Donald Trump’s promises to reduce corporate taxes could affect their ability to finance new projects. Their concern is the future of the Low Income Housing Tax Credit.
Investors like tax credits. And when taxes are high, they like to snap up those credits to offset their taxes. One credit they buy is used to build affordable housing. It’s known as the Low Income Housing Tax Credit. It’s been around for several decades.
But if the overall corporate tax gets cut, as President Trump has proposed, investors may not be as eager to seek out those affordable housing credits. Barbara Fields, director of Rhode Island Housing said if investors’ taxes are already lower they may be less likely to seek out those tax credits.
“Most of them are assuming that the tax rate for corporations is going to drop from the current rate of 35 percent. Is it going to be 20, or 22, or 27, or 28 percent,” said Fields. “Nobody knows, but it is certainly one of the things talked about in the campaign and in the Congress.”
Fields said the uncertainty is already causing some investors to buy cautiously.
“If an investor’s investing in 2017, they want to make a reasonable calculation what their tax rate is going to be,” said Fields. “So we are seeing a reduction in the yield, the dollar amount, we get for the credit.
“There seems to be anywhere between a 10 to 12 cent drop in the yield,” said Fields. “In some parts of the country, it’s actually been deeper.”
Fields says it’s too early to say whether changes in the corporate tax rate – or uncertainty about the future tax rate – will stall housing projects in Rhode Island.
