A tax credit program in Missouri for low income housing — one that’s popular with developers and also the subject of frequent criticism from Missouri politicians — is in peril.
The Missouri Housing Development Commission on Friday voted not to allocate $140 million in funding for the Missouri Low Income Housing Tax Credit Program. The tax credit offsets a percentage of tax liabilities for investors in low-income housing projects.
Friday’s decision was hailed by politicians, including Gov. Eric Greitens, as a way to save money on what’s often criticized as an inefficient program. Greitens under state law has a seat on the housing development commission.
“We zeroed out this failing program, and saved tens of millions of dollars,” Greitens said in a statement. “No. More. Giveaways.”
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But developers lamented the outcome, saying without the state tax credit program, financing affordable and workforce housing becomes a difficult proposition.
Kelley Hrabe, owner of Prairie Fire Development Group, said his plans for an $80 million affordable housing project in downtown Kansas City are now up in the air if the state tax credit program is in jeopardy.
“It just won’t pencil out,” Hrabe said. “It’s just basic, fundamental math.”
Missouri Democrats also panned the MHDC vote, the roles Greitens and Missouri Attorney General Josh Hawley, both MHDC commissioners, had in it.
“This is the price we pay for the governor’s and attorney general’s inexperience,” said Sen. Gina Walsh, a St. Louis County Democrat, in a written statement. “Instead of improving a program, they just throw it away. As a result, a lot of Missouri families who need affordable housing won’t be able to find it.”
Friday’s MHDC vote occurs as Congress is poring over two tax overhaul proposals that either restrict or eliminate federal historic tax credit programs. Kansas City is dotted with developments that involved historic tax credits and low income housing tax credits.
Kansas City leaders see the possibility of the two diminishing tax credit programs as a double-whammy for urban development.
“In terms of having long term programs that pay off to the benefit of Missouri, we don't have as many that have worked as well as the ones under scrutiny,” said Quinton Lucas, a Kansas City councilman who chairs the city’s Housing Committee.
Lucas has sought an affordable housing policy in Kansas City; Friday’s news jolted those discussions.
“What's the best way to say this? I think this is a disastrous policy choice that will undermine our efforts for a sustainable housing policy in Kansas City, Missouri,” Lucas said.
Megan Werner, executive vice president of Missouri Growth Association, a commercial real estate trade association, said the MHDC’s decisionmaking appeared to be based on misunderstandings of deadlines for approving 2018 low income tax credits, which is actually at the end of 2018.
“We are concerned that in addition to procedural misunderstandings, there is a lack of understanding of the benefits of these tax credits, which provide quality, reliable and safe housing for Missouri's veterans, seniors and low-income workforce,” Werner said in a statement. “ We hope the errors from today come to light so that we can address the real need to approve additional tax credits, which will help address housing shortages for those in need and spark economic growth and job creation in our communities.”
Both the low income housing and historic tax credit programs have received bipartisan scrutiny in Missouri over the years.
Audits over the last nine years have criticized the programs for inefficiencies. In 2008, an audit by then-Missouri Auditor Susan Montee found that for every dollar issued for the low income housing tax credits, only 35 cents made its way directly to the development of housing, with the rest going investors, syndicators and the federal government.
Greitens said low income housing tax credits started out with good intentions: “Use some tax dollars to build houses for poor people.”
“But here's what happened: for every dollar that went into the program, only about 42 to 55 cents actually went to building housing for poor people,” Greitens said in his statement. “That’s a bad deal any way you cut it.”
Earlier this year, Missouri Auditor Nicole Galloway said in a report that both the low income and historic tax credit programs “result in a low return on the state’s investment” and cost more to the state than the programs bring to it.
Lucas said inefficiencies exist in any number of endeavors, whether it’s government or private business.
“There are ways to solve inefficiencies in a program without doing away with the entire program,” Lucas said.