It has become a maxim inside the political cage match. If you want to start a fight, ask about affordable housing. The “housing Crisis,” real or imagined, was injected into the collective consciousness. Some blame boomers, others blame banks (or sinister global evils like Blackrock), as legislators dance around the fire tossing gasoline on it with myriad zoning bills.
Everyone agrees that housing prices in this economy are out of reach for most young adults. There is a growing number of other demographics who can’t find a place to live. And boomers with houses are being taxed into poverty on properties many of them own but still can’t afford. But the fact is, there’s no such thing as “affordable housing.” There is subsidized housing, not affordable, just taxpayer-backed, and then there’s … housing.
Developers don’t build anything that won’t make them money, and nothing is getting cheaper, so why build at all? Because people aren’t thinking it through.
First, take the developer’s side; it needs funding to complete the project. Traditionally, such funding came from lending institutions in the form of a construction loan or mortgage. Upon project completion, it would be converted into permanent financing with predetermined interest rates and amortization terms.
However, if there is no interest and amortization to be paid to a lender, the developer can assess lower rents to the residents (who must qualify by having household incomes below 50% of the area’s median income) of said project. This can be accomplished by having the project approved for Low-Income Housing Tax Credits (LIHTC). This is what corporations and high-income investors are looking for. Syndications have even packaged projects to spread the risk.
Instead of having the project mortgaged, the developer engages the same mortgage institution to make an equity investment in the project.
Why would a lending institution do this? Because the amount invested can be carried over ten years as credits against any federal income tax the institution, generally banks, owes from its other sources of taxable income. The credits eliminate some, if not all, of their taxes.
That’s in Vermont, but the federal program works in every state, so it’s relevant. And with that in mind, let’s reconsider all the zoning bills that have changed how developers can erect “housing,” in the form of apartments crammed into nooks. If renters qualify for low rents, the developers get reimbursed for the difference (you pay for it). If not, they can opt for the market rate, which in New Hampshire is typically around $ 2,000 a month or more, depending on the location. In either case, the investor, developer, corporation, or bank gets a tax write-off, and you may get increased housing density you didn’t want and likely can’t stop.
I’m sure I’ve missed some details and bollixed a few others, but at no point did I believe that leadership or the Governor were engaged in a wholesale redistribution of zoning powers to help people in need of a place to live.
Sure, they’ll let us have our gun rights until they won’t, and hey, you can walk around outside with a cup of beer, and we’ll make vaccine mandates illegal (and not exactly enforce that), but none of that costs anyone anything. Actual affordable housing costs taxpayers a fortune, enriches developers, and gives banks a handy tax write-off. At the same time, homes are still over-valued, so they can be overtaxed, enriching local municipalities that will take those homes if you don’t pay.
Many of which will have been paid for in full, for which new mortgages will be written for new owners to pay interest on.
It would be interesting to see who in leadership is receiving donations from developers and banks, just as it is interesting to see who receives donations from casino owners and gambling interests, as these facilities multiply and expand.
