Missouri’s low-income housing tax credit, zeroed-out by Eric Greitens in 2017, is back
Missouri’s low-income housing tax credit (LIHTC), sought by developers looking to build affordable housing but often criticized by politicians for its inefficiency, has resumed after a lengthy moratorium.
The Missouri Housing Development Commission (MHDC) voted unanimously on Friday to restart the complicated program, which is usually coupled with a federal tax credit to encourage developers to build housing for lower-income residents.
The MHDC’s decision will be applauded by developers and tenant advocates, who note that the supply of affordable housing in Missouri badly trails demand. Developers, in particular, say it’s hard to make such ventures work financially without the credit.
Jeff Smith, executive director of the Missouri Workforce Housing Association, said about 100,000 people across Missouri are on a waiting list for affordable housing.
“There’s a huge need for affordable housing throughout the state,” Smith said. “People assume it’s just in crowded urban areas. That’s not the case. There’s a need across the state.”
But the LIHTC resumes without legislative reforms that were once thought necessary to get the program running again.
The MHDC adopted some changes, including a public scoring system for applicants that proponents say will provide more transparency about who gets the tax credits and why. Another MHDC change, an accelerated redemption of tax credits, is expected improve tax credit pricing.
Evaluations of the LIHTC program by politicians in both parties have questioned whether the state gets enough in return for its investment in the tax credit. In 2014, a report by then-Missouri Auditor Tom Schweich, a Republican, found that for every dollar issued for LIHTC, only 42 cents is spent on construction with the rest going to federal income tax and investors.
Former Missouri Gov. Eric Greitens was perhaps the most strident critic of LIHTC and other development tax credits, calling developers who used it and investors who bought the credits “tax credit millionaires,” portraying both as lavishly cashing in on a government program.
In 2017, a year before he resigned in disgrace, Greitens zeroed-out the state LIHTC, meaning the state would not match federal version of the tax credit. More recently, Greitens has hinted that the state’s LIHTC industry conspired to undermine him by bankrolling an attorney representing the ex-husband of a woman who Greitens was alleged to have sexually assaulted and blackmailed.
Smith disputed the contention by Greitens and others that LIHTC was a cash grab for investors.
“It suggests 58 cents are going into somebody’s pockets,” Smith said of the audit finding. “That couldn’t be further from the truth.”
Smith said investors often get a high single-digit return for their investment in LIHTC, which “doesn’t seem to be out of line given there are risks to the investor if the developer or property management firm doesn’t comply with all the state and federal regulations.”
Tax credits are issued by the MHDC purchased by investors, often banks or syndicators. The developers use the money from the sale of tax credits to reduce rent to tenants while the investors can redeem the credits to reduce their tax liability.
This story was originally published September 28, 2020 at 5:00 AM with the headline "Missouri’s low-income housing tax credit, zeroed-out by Eric Greitens in 2017, is back."
