Developers seek to link housing tax credits with inflation.

Real estate professionals are applauding the success of the federal government's tax credit program, which has improved housing options for low-income Americans, and wish to see the program expanded.

However, more than half of those who participated in a recent survey fear that the current cost of these tax credits is not properly adjusted to the rate of inflation, and many believe this misalignment will ultimately cause developers to abandon their affordable housing initiatives.

Results of the survey, conducted by the national certified public accounting and consulting firm Altschuler, Melvoin and Glasser LLP and the law firm of Fulbright & Jaworski LLP, clearly indicate that developers feel the government must adjust the costs of the credits by indexing them to inflation, or residents seeking affordable housing may be subjected to fewer choices in the future.

A broad scope of local, regional and national developers, syndicators, lenders, investors, investment bankers, property management professionals, attorneys, accountants and other real estate professionals participated in the just completed survey.

Respondents were asked to rate the extent to which they agree the federal Section 42 affordable housing tax credit program has been a catalyst in developing more and improved housing options for low-income families and individuals. Answers were indicated on a scale from 1 to 10, with 10 indicating "strongly agree," 5 indicating "no impact," and 1 indicating "strongly disagree."

Forty percent of the 59 respondents indicated their level of agreement at 10, and similarly 50 percent indicated a rating of 8 or 9. Only 10 percent of respondents rated their agreement level at 7, which though lower, still indicates a high level of agreement.

Respondents were further asked whether they believe the cost of these tax credits is properly adjusted to the rate of inflation. Sixty-five percent of the respondents replied that they are not properly adjusted to inflation. Nearly 40 percent of that group said they believe the high cost would eventually cause developers to drop out.

"Obviously, the low income housing tax credits substantiated by the General Accounting Office (GAO) and the National Council of State Housing Agencies are the most effective means of providing affordable, safe and sanitary housing for low income Americans," said Sidney Grossfeld, National Director of the Affordable Housing Division of Altschuler, Melvoin and Glasser's National Real Estate Group. "However, in order for the program to continue and maintain its success, it is imperative that the credit cap be increased, as proposed by a current Senate bill, and that future credit caps be indexed to inflation."