Policy Issues

Property Conversions and Housing Tax Incentives

Issue Position Background

ISSUE

The United States is facing a severe shortage of affordable housing. At the same time, certain other commercial real estate assets like office buildings are under significant stress due to pandemic-related issues, including employers’ greater reliance on remote work arrangements. The Roundtable is encouraging lawmakers to help revitalize cities, boost local tax bases, and address housing challenges by enacting a tax incentive for converting older, under-utilized buildings to housing. The Roundtable also supports a meaningful expansion of the low-income housing tax credit. 

Property conversions: In the 117th Congress, Senator Debbie Stabenow (D-MI) and Representative Jimmy Gomez (D-CA) introduced legislation, the Revitalizing Downtowns Act (S.2511, H.R.4759), which would create a new tax credit to reduce the costs associated with converting older office buildings to housing or other uses. In October 2022, a Roundtable-led coalition of 16 national real estate organizations endorsed the legislation while suggesting a number of improvements to further strengthen the bill.

Low-income housing tax credit: Since its inception in 1986, the low-income housing tax credit (LIHTC) has financed the development of nearly 3.5 million affordable rental homes that house over eight million low-income households. President Biden’s Build Back Better agenda originally proposed dedicating $32 billion to the expansion of LIHTC. The president’s desired investment in additional LIHTC allocations represents a 30% increase over the current federal subsidy. The Build Back Better Act approved by the House Ways and Means Committee would have provided $29 billion over 10 years to expand LIHTC, including a 50% increase in the allocation of credits to states.

In May 2022, the administration released its Housing Supply Action Plan, which calls on Congress to enact new tax credits for the development and rehabilitation of affordable housing sold directly to low-and moderate-income owner-occupants. It also proposes an expanded LIHTC subsidy for projects that otherwise would not be financially viable.

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Position

Congress should help expand and grow the supply of affordable and workforce housing by investing greater resources in time-tested tax incentives like the low-income housing tax credit and adopting creative new approaches that support the conversion of underutilized, existing buildings to housing.

Background

  • A quarter of American renter households spend more than 50% of their income on housing expenses. More than 10 million low-income households spend more than half of their monthly income on rent, according to Harvard’s Joint Center for Housing Studies.
  • The conversion of underutilized and often vacant buildings offers a tremendous opportunity to improve the built environment and lift a surrounding locality. Property conversions are a cost-effective means to develop new housing supply, create jobs, and generate critical sources of local property tax revenue. 
  • Conversion projects can occur in a variety of settings, from central business districts and suburban office parks to rural communities and industrial facilities. The repurposing of existing structures can save energy while reinvigorating communities and reigniting economic growth where it is most needed.
  • The inherent risks and elevated costs associated with property conversions, combined with the numerous social and economic benefits of conversions that flow to the broader community, justify proactive government policies that incentivize owners to adapt existing properties to new uses.
  • LIHTC is an efficient, market-based housing solution that relies on the private sector to finance, build, and operate affordable housing by creating a federal incentive for new construction and redevelopment.
  • Under the successful LIHTC program, states can award housing credits based on their own affordable housing priorities. They can target credits to housing units dedicated to certain populations such as seniors or veterans, or to specific regions most in need of affordable housing.
  • The Tax Cuts and Jobs Act of 2017 indirectly diminished the value of low-income housing credits because the corporate tax cut reduced the underlying tax liability of many tax credit purchasers, thereby decreasing demand for the credits in the marketplace.
  • Congress should significantly expand LIHTC, along the lines of the Affordable Housing Credit Improvements Act (S.1136, H.R. 2573), which would create and preserve more than two million affordable homes, support three million jobs, and generate $119 billion in sustainable tax revenue.


Other Resources

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Roundtable Weekly (Policy Newsletter & Archive)
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Annual Report (Roundtable Accomplishments & Activities)
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Policy Agenda (Roundtable Goals & Advocacy)