Tax credits for low-income housing are ‘dead’ amid scrutiny from lawmakers, Greitens

Quinlan Row, a low-income housing development, is under construction between 8th and 9th streets along Woodland Avenue in Kansas City. A related project, Quinlan Place, is on The Paseo.
Quinlan Row, a low-income housing development, is under construction between 8th and 9th streets along Woodland Avenue in Kansas City. A related project, Quinlan Place, is on The Paseo.

An embattled tax credit for developers who build low-income housing units is essentially dead and developers worry that so are efforts to build affordable housing in Kansas City.

Low-income housing tax credits provide an incentive for developers who build affordable housing, but they've been criticized as inefficient. Gov. Eric Greitens says the credits line the pockets of wealthy developers.

Greitens' legal team has implied that the industry may be connected to payments made to a lawyer representing the ex-husband of the woman with whom the governor had an affair in 2015. His lawyers this week asked a Missouri House committee investigating allegations of misconduct against him to issue subpoenas to a bank and developer involved in low-income housing development.

The Missouri Housing Development Commission, which is led by Greitens and administers funds for affordable housing, decided late last year it wouldn't issue any state tax credits this year. The federal government grants its own tax credits for affordable housing.

In a statement, Greitens' spokesman, Parker Briden, said the governor thought the program was "a scam" and pointed to a Greitens-appointed committee that suggested the tax credit program be converted to a low-interest loan program for affordable housing developments.

"In the meantime, the Governor won’t support the status quo and allow these people to rip off working class families, seniors, and taxpayers," Briden said.

On top of that, the Missouri House Budget Committee didn't approve credits for the fiscal year that runs from July 2018 through June 2019. Without the credits, Kansas City developers argue affordable housing just won't be built.

Committee chair Rep. Scott Fitzpatrick, R-Shell Knob, said the program was costly and inefficient.

The housing development commission, he said, could change its mind and issue tax credits, "but I'm hopeful that they'll hold the line until we can get back here next year to hopefully work on some reforms for the program," Fitzpatrick said.

Bob Mayer, a real estate consultant with MR Capital Advisors, said the tax credits "are dead in Missouri right now."

Mayer said he had previously looked to low-income housing tax credits to help fund projects, but "decided not to bang (his) head against the wall" before Greitens took office. He said he steers his development clients away from low-income housing tax credits for Missouri projects.

Jeff Smith, executive director of Missouri Workforce Housing Association, said in a statement his organization was "extremely disappointed" by the budget committee's decision.

"As evidenced by the tens of thousands of Missourians sitting on wait lists for affordable housing, there is a great need for safe, decent housing across the state," Smith said. "But the problem in Kansas City is particularly acute, since urban revitalization has dramatically increased rents in many city neighborhoods."

Smith is not the Columbia developer by the same name whom Greitens' lawyers want the House investigative committee to serve with a subpoena.

Kansas City projects including the St. Michael’s Veterans Center for homeless veterans, Curls Manor and Paseo Gateway got help from low-income housing tax credits.

Mark Stroker, director of real estate development for St. Louis-based Rise Community Development, said the credits are one of the "most valuable tools" in reshaping neighborhoods that need affordable, quality housing or being a catalyst for redevelopment.

“We’re here for the long haul and we're going to stay in the fight," Stroker said.

Last year, more than $100 million worth of housing projects got help from low-income housing tax credits. Stuart Bullington, deputy director of Kansas City's housing department, said he would be surprised if $20 million worth of projects got funded this year.

“A lot of those will not get financing, so they’ll be either deferred or stop," Bullington said.

According to a memo from the Missouri Housing Development Commission, 72 projects are somewhere in the process of development and have been approved for tax credits.

Low-income housing tax credits are often criticized as inefficient, and an audit by Missouri Auditor Nicole Galloway found the low-income program and credits for historic preservation are inefficient. Not every dollar invested in the credit program ends up going to the project itself.

Bullington pushed back against that criticism.

"If they want to appropriate funds and make grants, then they can do that, but they’re not going to do that," Bullington said.

Greitens' team has suggested links between accusations of sexual misconduct against the Missouri governor and business interests angry about the Missouri Housing Development Commission's decision to suspend the tax credit program. Lawyers have implied the money paid to Missouri Times Publisher Scott Faughn was connected to low-income housing.

Sterling Bank, a Poplar Bluff, Mo., bank involved in the credits sponsors Faughn's weekly television show, "This Week In Missouri Politics," but Faughn has said he had no knowledge about whether the bank was involved in the industry.