March 7, 2018 Comments Off on The New Tax Bill: Bad News for Affordable Housing Views: 600 Connect Apartments

The New Tax Bill: Bad News for Affordable Housing

Though there have been articles written about some of the benefits that will come to commercial real estate thanks to the Job Creation and Tax Cut Act of 2017, one sector will be in trouble. That sector is affordable housing. According to a recent report from Reis Inc., the tax bill means that nearly one-third of the current 132,000 units of affordable housing currently in development “are at risk of not receiving the necessary financing.” Reis economist Barbara Byrne Denham noted that the tax cuts are reducing the incentives to buy tax credits that, in turn, spur affordable housing.

In the past, affordable housing developers acquired tax credits to offset tax liabilities. However, with the corporate tax rate having been cut from 35% to 21%, “developers no longer need to offset taxes to the extent that they used to,” Denham wrote. Though this doesn’t mean that developers will stop building affordable properties altogether, Denham said it’s likely they might either cut back on such developments or question their validity.

Reis’ current forecast for affordable housing completions indicated that 95,000 units are expected to come online through 2020. However, 129,000 affordable units in the proposed and planning stages are at risk of not getting funded with those tax credits.

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