3,000 Oregon rental units at risk under tax plan
SALEM – In the midst of a critical affordable housing shortage in Oregon, the state could lose out on nearly 3,000 new rental units under a tax overhaul plan approved by the U.S. House of Representatives Nov. 16, according to an analysis by a tax reform resource center.
The loss of rental units would result from the proposed elimination of private activity bonds in the House version of the tax reform plan, according to the analysis by California-based Novogradac & Co.
It's unclear whether the termination of private activity bonds will be part of the final reform package.
The bonds support two programs crucial to the development and preservation of affordable rental units in Oregon and nationwide, said Margaret Solle Salazar, director of Oregon Housing and Community Services. The programs include a low-income house tax credit program and low-interest mortgages.
"Every community in Oregon is facing unprecedented housing need," said Ariel Nelson, a OHCS spokeswoman. "The severity of Oregon's housing crisis cannot be overstated."
Twenty-seven percent of Oregon households spend more than 50 percent of their income on housing and utilities, greater than the one-third recommended by financial experts. Oregon also is facing a deficit of more than 94,000 homes, which would be affordable to households at 60 percent of median income. Sixty percent of median income is $44,820 for a family of four in Multnomah County in 2017.
The federal 4 percent Low Income House Tax Credit program helps leverage millions of dollars in private sector investment into affordable housing units. The program accounts for nearly 50 percent affordable rental housing developed annually nationwide, according to OHCS.
In Oregon, about 1,343 affordable units were projected to be developed this year using the tax credit program. Nearly 300 have yet to be completed. Plans for 1,818 units in 2018 are in the works. Those nearly 2,000 homes' development are in jeopardy under the tax plan, Nelson said.
The elimination of private activity bonds also would derail a plan by the state Legislature to combine the bonds with funds from the Local Innovation and Fast Track housing program and private investment. That plan put hundreds of affordable homes in the pipeline for development, Nelson said.
The bonds also support a program to provide low-interest mortgages to first-time homebuyers. In 2017, the program was projected to finance 647 mortgages at a total of $136.3 million. The program would no longer be funded without the bonds, Nelson said.
Novogradac & Co. estimates the effects of eliminating private activity bonds could decimate rental units in every state. In California, the estimated loss is more than 260,000.
Salazar said she has sent a letter to Oregon's two senators, Jeff Merkley and Ron Wyden, and Rep. Greg Walden urging them to support private activity bonds.
"We are charging forward trying to serve Oregonians and these are critical tools, and we are just hopeful the delegation of our elected officials hears the need and do the right thing."