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Housing Tax Credits Hit by Mortgage Woes

Amy Radil
08/08/2008

Increasing mortgage defaults in the Seattle area mean more people are seeking affordable rental housing, experts say. Banks have also quit buying the tax credits intended to finance NEW affordable housing. But advocates say the bill signed by President Bush last week (7/31/08) represents progress. KUOW's Amy Radil reports.

OFFICIALS SAY DEMAND FOR AFFORDABLE RENTAL HOUSING HAS SPIKED IN THE PUGET SOUND REGION IN THE LAST TWO YEARS.

NORMAN: "We opened our waiting list for two weeks last summer and over 10,000 households who were either homeless or in substandard housing or severely rent burdened applied. And that's just in two weeks."

STEPHEN NORMAN IS THE EXECUTIVE DIRECTOR FOR THE KING COUNTY HOUSING AUTHORITY. HE SAYS THE HOUSING CRISIS HAS FUELED MORE LOWER–INCOME RENTERS FOR TWO REASONS. PEOPLE WHOSE HOUSES ARE FORECLOSED ON MUST NOW RENT, WHILE RENTERS WHO COULD AFFORD A HOUSE NOW CAN’T GET THE FINANCING. AT THE SAME TIME, BANKS WHICH HAVE TRADITIONALLY INVESTED IN TAX CREDITS TO BUILD AFFORDABLE HOUSING HAVE NOW PULLED OUT. NORMAN SAYS EXISTING PROJECTS WERE KEPT ALIVE THROUGH GOVERNMENT INTERVENTION.

NORMAN: "The state and the housing finance commission and most recently Senator Cantwell's changes to the low income housing tax credit program have essentially assured that the existing pipeline is going to continue, however we're not seeing the kind of increase in production that we desperately need."

AT A FORUM IN BELLEVUE YESTERDAY, ADVOCATES THANKED CANTWELL FOR GETTING A LITTLE NOTICED PROVISION INTO THE HOUSING BILL SIGNED LAST WEEK. CANTWELL SAYS IT SHOULD HELP MAKE THE TAX CREDITS EASIER TO USE, WHICH WILL HELP FUND AFFORDABLE HOUSING PROJECTS.

CANTWELL: "We obviously have to use this legislation we just passed to help homeowners and to continue to protect the amount of low income housing stock that we have in our community."

BUT THE CHALLENGE NOW IS TO FIND NEW INVESTORS FOR THE TAX CREDITS, SINCE BANKS AREN'T BUYING RIGHT NOW. EMILY CHEN IS WITH THE NATIONAL EQUITY FUND. HER FIRM OFFERS PORTFOLIOS OF LOW–INCOME HOUSING PROJECTS FOR COMPANIES TO INVEST IN. CHEN SAYS THE TAX CREDITS ARE A FAIRLY EASY SELL ONCE INVESTORS UNDERSTAND THEM.

CHEN: "It's really to be able to let companies who maybe weren’t as aware of the program know that, so when they report back to their shareholders, it’s something that’s easy to stand behind, it's not that volatile."

SHE SAYS HER FIRM IS HOPING TO INTEREST CORPORATE INVESTORS LIKE NORDSTROM, WHICH HAS PURCHASED THE TAX CREDITS IN THE PAST. CHEN SAYS THE AFFORDABLE HOUSING PROJECTS FINANCED BY THE TAX CREDITS HELP STABILIZE COMMUNITIES, AND HAVE A LOWER RATE OF DEFAULT THAN TYPICAL MARKET RATE HOUSING. IN THIS MARKET, CHEN SAYS HER FIRM EMPHASIZES THAT THE TAX CREDITS ARE A STABLE INVESTMENT, WITH A SOCIAL CONSCIENCE.

AMY RADIL, KUOW NEWS.

Editor's Note: Transcript has been edited and differs from the braodcast version. 8/15/2008