INCREASING HOUSING TAX CREDIT ALLOCATIONS

SENATOR ALFONSE D'AMATO(R-NY)

This past year I introduced, with my friend and colleague, Senator Phil Graham of Florida, long overdue legislation to increase the cap on state authority to allocate low-income housing tax credits to $1.75 per capita, and to index the cap to inflation. The current cap of $1.25 per capita has not been adjusted - not even to account for inflation - since the program was created over a decade ago. This cap is strangling a state's capacity to meet pressing low-income housing needs.

Annual cap growth is limited to the increase in state population, which has only been 5 percent nationwide over the past decade. During the same time period, inflation has eroded the housing credit's purchasing power by approximately 45 percent, as measured by the Consumer Price Index.

Housing credits are the primary federal-state tool for producing affordable rental housing across the country. Since 1987, state agencies have allocated more than $3 billion in housing credits to help finance nearly 900,000 apartments for low-income families, including 75,000 apartments in 1996. In my own state of New York, the credit is responsible for helping finance 44,000 apartments for low-income New Yorkers, including 4,450 apartments in 1996.

This past year, the General Accounting Office (GAO) issued a comprehensive report giving the housing credit a clean bill of health. That report documents that the program exceeds a number of important congressional objectives. For example, though the law allows housing credit apartment renters to earn up to 60 percent of the area median income, GAO documented the average resident's income at just 37 percent and found that more than three out of four renters have incomes under 50 percent of the area median income. GAO also found that rents in housing credit apartments are well below market rents, up to 23 percent less than the maximum permitted, and 25 percent below HUD's national fair market rent.

The GAO report documents that states are giving preference to apartments serving low-income residents longer than the 15 years the law requires. In fact, two-thirds of the apartments GAO studied were set aside for low-income use for 30 years or more.

Ernst & Young completed a second major objective of the credit, reiterating many of the positive findings of the GAO report, demonstrating a tremendous need for additional affordable housing, and documenting the devastating effect of the current cap on states' ability to finance this critically needed housing.

Despite the success of the housing credit in meeting affordable rental housing needs, the apartments it helps finance can barely keep pace with the nearly 100,000 low-cost apartments which are demolished, abandoned, or converted to market rate use each year. Increasing the housing credit cap, as Senator Graham and I propose, would allow states to finance approximately 25,000 more critically needed low-income apartments each year.

Nationwide, demand for housing credits outstrips supply by more than three to one. In 1996, states received applications requesting more than $1.2 billion in housing credits - far surpassing the $365 million in credit authority available to allocate that year.

The New York Division of Housing and Community Renewal received applications requesting more than $104 million in housing credits in 1996 - nearly four times the $29 million in credit authority it already had available.When I think of the immense need for affordable housing within my state, I can only characterize this decade-old limit on state credit authority as an overwhelmingly lost opportunity.

D'Amato, in his third term, is chair of the Senate Banking, Housing and Urban Affairs Subcommittee. U