What does it take to fix a neighborhood in decline?
Stand on the corner of Elm Street by Washington Park in Cincinnati, and you’ll find the answer. It is one of the city’s oldest and largest parks, in one of America’s most economically distressed areas. Fifteen years ago, it was just another eyesore in a neighborhood so plagued by crime that residents were afraid to walk the streets. Businesses had fled.
Not anymore. Today, the park is green and clean. Diverse families and neighbors gather for concerts under the stars, yoga on the green, festivals and kickball. It is the centerpiece of a neighborhood coming back to life, and a short walk from renovated apartment houses and a rebounding district of shops and restaurants.
Washington Park is not an isolated example. Neighborhoods from the South Bronx to Houston to Oakland, Calif., to Woonsocket, R.I., are experiencing a similar rebirth.
How so? With two federal tax credits: one that supports 90 percent of affordable housing development nationwide, and another that is spurring investments in businesses, real estate projects and health clinics, charter schools and child care centers, all in low-income communities.
In Kansas City, Kan., more than $14 million from one of those credits through the Local Initiatives Support Corp. helped complete the Children’s Campus of Kansas City. And last year in Kansas City, $5 million filled in a funding gap to complete a new building for the DeLaSalle Education Center.
Since 1981, in fact, the Greater Kansas City Local Initiatives Support Corp. has invested more than $143 million into urban-core neighborhoods on both sides of the state line.
But these credits may be in peril. Congress is working on an overhaul of the tax code that seeks to eliminate deductions and credits, including these tried-and-true programs.
The arguments for tax reform are well known, but eliminating these credits would be tragic. They bring much-needed capital to communities most investors would never consider.
Passed by Congress in 1986 and signed into law by President Ronald Reagan, the low-income housing tax credit gives the private sector an incentive to create and invest in affordable housing. It is widely viewed as one of the most effective federal housing programs ever.
To date, it has financed the development of about 2.6 million affordable rental homes across the country, leveraging more than $100 billion in private capital to do so. These properties outperform other real-estate categories, with occupancy rates topping 96 percent and a cumulative foreclosure rate of less than 1 percent.
The new-markets tax credit, created in 2000, was born of the same principles that gave rise to the housing credit: first, that the private sector needs incentives to invest in worthy projects that would otherwise be considered too risky; and second, that those incentives lead to greater accountability and superior project performance when compared with federal grant programs.
As of 2011, the new-markets credits had financed 3,500 businesses and real estate projects in low-income neighborhoods, developed or rehabilitated more than 109 million square feet of commercial real estate and community facilities, and helped to create or preserve more than 360,000 jobs.
Last year alone, the housing and new-markets credits together attracted $14 billion in direct investment in capital-starved communities, supporting an estimated 160,000 jobs.
These credits serve populations that are the hardest to reach and the most distressed. More than 80 percent of housing credit units go to families making less than half the median income in their area. Nearly three-quarters of new-markets investments go to areas that the Treasury Department considers to be in severe need.
The Government Accountability Office in 2007 estimated that 88 percent of those who used the credit would not have made the investment without it.
Both parties in Congress should recognize that housing and new-markets credits are strong drivers of economic stability and opportunity for residents and businesses that have all but run out of hope. They are not easily replaced by other public or private capital.
If these credits were to disappear, so too would billions of dollars of annual investment in America’s poorest ZIP codes. The result would be lost jobs, more homelessness, a decimated affordable-housing market and destabilized communities.
So much of what is done in the nation’s capital needs fixing. Let’s not end what works.