[Congressional Record Volume 143, Number 136 (Friday, October 3, 1997)]
[Senate]
[Pages S10322-S10323]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO (for himself and Mr. Graham):
  S. 1252. A bill to amend the Internal Revenue Code of 1986 to 
increase the amount of low-income housing credits which may be 
allocated in each State, and to index such amount for inflation; to the 
Committee on Finance.


           THE LOW-INCOME HOUSING TAX CREDIT CAP ACT OF 1997

  Mr. D'AMATO. Mr. President, I rise today with my friend and 
colleague, Senator Graham of Florida, to introduce long overdue 
legislation to increase the cap on State authority to allocate low-
income housing tax credits--housing credits--to $1.75 per capita, and 
to index the cap to inflation. The current cap of $1.25 per capita has 
not been adjusted--not even to account for inflation--since the program 
was created over a decade ago. This cap is strangling a State's 
capacity to meet pressing low-income housing needs.

  Annual cap growth is limited to the increase in State population, 
which has only been 5 percent nationwide over the past decade. During 
the same time period, inflation has eroded the housing credit's 
purchasing power by approximately 45 percent, as measured by the 
Consumer Price Index.
  Mr. President, as you may know, housing credits are the primary 
Federal-State tool for producing affordable rental housing across the 
country. Since 1987, State agencies have allocated more than $3 billion 
in housing credits to help finance nearly 900,000 apartments for low-
income families, including 75,000 apartments in 1996. In my own State 
of New York, the credit is responsible for helping finance 44,000 
apartments for low-income New Yorkers, including 4,450 apartments in 
1996.
  Earlier this year, the General Accounting Office issued a 
comprehensive report giving the housing credit a clean bill of health. 
That report documents that the program in fact exceeds a number of 
important congressional objectives. For example, though the law allows 
housing credit apartment renters to earn up to 60 percent of the area 
median income, GAO documented the average tenant's income at just 37 
percent, and found that more than three out of four renters have 
incomes under 50 percent of the area median income. GAO also found that 
rents in housing credit apartments are well below market rents, up to 
23 percent less than the maximum permitted, and 25 percent below HUD's 
national fair market rent.
  The GAO report also documents that States are giving preference to 
apartments serving low-income tenants longer than the 15 years the law 
requires. In fact, two-thirds of the apartments GAO studied were set 
aside for low-income use for 30 years or more.
  A second major assessment of the credit has been objectively 
completed by Ernst & Young, reiterating many of the positive findings 
of the GAO report, demonstrating a tremendous need for additional 
affordable housing, and documenting the devastating effect of the 
current cap on States' ability to finance this critically needed 
housing.
  Despite the success of the housing credit in meeting affordable 
rental housing needs, the apartments it helps finance can barely keep 
pace with the nearly 100,000 low cost apartments which are demolished, 
abandoned, or converted to market rate use each year. Increasing the 
housing credit cap, as Senator Graham and I propose, would allow States 
to finance approximately 25,000 more critically needed low-income 
apartments each year.
  Nationwide, demand for housing credits outstrips supply by more than 
3 to 1. In 1996, States received applications requesting more than $1.2 
billion in housing credits--far surpassing the $365 million in credit 
authority available to allocate that year.
  In New York, the New York Division of Housing and Community Renewal 
received applications requesting more than $104 million in housing 
credits in 1996--nearly four times the $29 million in credit authority 
it already had available. When I think of the immense need for 
affordable housing within my State, I can only characterize this 
decade-old limit on State credit authority as an overwhelmingly lost 
opportunity.
  Mr. President, in 1993, Congress made the housing credit permanent 
with unprecedented, overwhelmingly bipartisan cosponsorship. In 
addition, the Nation's Governors have adopted a policy calling for an 
increase in the housing credit cap.
  Mr. GRAHAM. Mr. President, today I join my colleague Senator D'Amato 
as we introduce legislation to increase the amount of low income 
housing tax credits allocated to the States and to index the low-income 
housing credit for inflation.
  In a time of fiscal austerity, housing credits encourage private 
investment in economically sound, privately owned, affordable homes for 
low-income working families in all 50 States. By helping families that 
get up and go to work every day to earn their rent and mortgage 
payments, the low-income housing credit provides families with an 
important stake in maintaining self-sufficiency.
  Mr. President, the low-income housing tax credit was created in the 
1986

[[Page S10323]]

tax reform bill in the wake of decreasing appropriations for federally-
assisted housing and the elimination of other tax incentives for rental 
housing production. The housing credit encourages the construction and 
renovation of low-income housing by reducing the tax liability placed 
on the developers of affordable homes. The credit is based on the costs 
of development as well as the percentage of units devoted to low-income 
families or individuals.
  The current formula used in determining a State's housing credit 
allocation is $1.25 multiplied by the State's population. Unlike other 
provisions in the Tax Code, this formula has not been adjusted since 
the credit was created in 1986. During the same period, inflation has 
eroded the credit's purchasing power by nearly 45 percent, as measured 
by the Consumer Price Index.
  The bipartisan bill Senator D'Amato and I introduce today proposes to 
increase the annual limitation on State authority to allocate low 
income housing tax credits to $1.75 per capita and index the cap for 
inflation. By freeing the 10-year-old cap on housing credits from its 
current limitation, as requested by the Nation's Governors, our bill 
will liberate States' capacity to help millions of Americans who still 
have no decent, safe, affordable place to live.
  A brief look at the history of the housing credit provides ample 
evidence of why our legislation is needed. In the State of Florida, for 
example, the LIHTC has used more than $187 million in tax credits to 
produce approximately 42,000 affordable, rental units, valued at over 
$2.2 billion. Tax credit dollars are leveraged at an average of $18 to 
$1. Nevertheless, in 1996, nationwide demand for the housing credit 
greatly out paced supply by a ratio of nearly 3 to 1. In Florida, 
credits are distributed based upon a competitive application process 
and many worthwhile projects are denied due to a lack of tax credit 
authority.
  This spring, the U.S. General Accounting Office [GAO], Congress' main 
investigative agency, released a national audit of the Low-Income 
Housing Tax Credit Program. The GAO found that the average housing 
credit apartment renter earns only 37 percent of the local area median 
income. Further, surveyed properties--more than 450--appeared to be in 
good condition and well-maintained. Additionally, the GAO reported that 
housing credit properties ``overwhelmingly comply with statutory and 
regulatory requirements.''
  Mr. President, I'd like to draw attention to one example of how the 
low-income housing tax credit has benefited American families. I am 
referring to the Holly Cove housing community developed by Vestcor 
Equities near Jacksonville, FL. Vestcor provides clean, safe and 
affordable living environments for low- to moderate-income residents by 
developing, renovating, and operating multifamily communities.
  In addition to affordable housing, Vestcor, through developments such 
as Holly Cove provides community services to improve the quality of 
life of their residents. Through counseling, education, and resident 
involvement, Vestcor energizes its community and provides residents 
with the tools they need for success. Activities and educational 
programs offered include: budgeting and credit counseling, resume 
writing assistance, GED classes, substance abuse counseling, and after 
school homework assistance. In short, with the help of the low-income 
housing tax credit, Vestcor Equities strengthens the community by 
investing in children and families.
  Vestcor Equities provides first-hand evidence of the important role 
the low-income housing tax credit offers as a catalyst of private 
sector investment in our communities.
  Mr. President, as we struggle to balance the budget and restore 
fiscal responsibility in Washington, the housing credit allows 
bureaucrats to step aside and let the free market fill an important 
need in America's communities. I hope my colleagues will embrace this 
important legislation.
                                 ______