The recently adopted federal tax bill has been roundly criticized by Long Island lawmakers for slashing the amount of mortgage interest and state and local taxes that New Yorkers can deduct on their federal returns.
But the bill has also delivered a blow to those praying for the rental market to expand—by discounting the tax credits that many affordable housing projects rely on to raise their construction capital.
For the East Hampton Housing Authority, the hit to the value of tax credits created a sudden shortfall in revenue projections just as the group was getting ready to file its applications for permits to build a planned 37-unit apartment complex in Amagansett.
“The drop created a $2 million gap for us,” said Katy Casey, director of the East Hampton Housing Authority, which is seeking the approvals, and funding, for the middle-income rental apartments. “The application we submitted in December calculated the budget based on an offering of $1.04, a number we picked in advance, in anticipation. Last year, the proposal used $1.18. People will still buy them—it’s just a matter of how much they are willing to pay.”
New York State doles out tax credits, both state and federal, to projects that promise to create housing units priced under certain income eligibility parameters. The credits can be sold to investors and corporations who can hold onto them for up to 10 years, a flexibility that makes them a valuable asset for someone who may see windfall profits in some years and not in others. The credits typically attract an exchange rate higher than their actual value.
But with the federal tax rate that many of the country’s highest earners are facing about to fall, precipitously in the case of corporations, tax credits are expected to be somewhat less in demand, thus the drop in their value and the commensurate drop in the amount groups like the housing authority can expect to get from their allocation of credits for housing projects.
Ms. Casey said the housing authority is hoping to make up what it don’t get in tax credits with other grants from New York State, which has expanded its affordable housing grants in response to the new tax bill. She said there are additional grants for workforce housing projects near public transportation connections.
“In an odd way, this may actually help us, since we are very transit-oriented in Amagansett,” she said. “It’s a good time to be developing near the train station and right on the county bus line.”
on Jan 30, 2018