Lawmakers must reform Low Income Housing Tax Credit program

Would you pay $1 for only 42 cents worth of bread? Or milk? No, of course not. However, that is exactly what was occurring with your state tax dollars authorized for low income and senior housing. I say “was,” because on Nov. 17, Gov. Eric Greitens put an end to this insanely “bad deal” for Missouri taxpayers. You deserve better, and the leader of the Show-Me State agreed. Gov. Greitens began his methodical reform efforts with the appointment of the Governor’s Committee on Simple, Fair and Low Taxes in early 2017. The committee issued its report on June 30 and recommended converting the state Low Income Housing Tax Credit (LIHTC) program to a low-or-no interest loan program so every dollar allocated to public housing is spent on public housing.

According to the Office of Missouri State Auditor in Report No. 2017-051, issued June 2017, the state LIHTC program provides tax credit certificates to developers. The program is a discretionary credit, administered by the Missouri Housing Development Commission. This program is the state’s largest tax-credit program, with an average of approximately $152 million per year in redemptions over the past four years. The program also represents a significant liability to the state with approximately $1.3 billion in credits outstanding and obligated as of June 30, 2016. Credits are limited up to 100 percent of the federal LIHTC allocation for 9 percent credits, and $6 million annually on 4 percent credits. By state statute, the percentage of credits authorized is at the sole discretion of the Missouri Housing Development Commission. The Commission has historically chosen to authorize up to the 100 percent limit each year since a law change in 1997 increased the limit from 20 percent of the federal allocation. According to tax credit analysis forms prepared by the Department of Economic Development, the program returns an estimated 12 cents for every 1 dollar. In 2008 and 2014 (Report No. 2014-014, issued in March 2014) the Office of Missouri State Auditor noted inefficiencies that results in only approximately 42 cents of every credit dollar actually going toward low income housing projects. The remainder goes to the federal government, investors and tax credit syndicators.

Thirty-one other states have NO state LIHTC program. Only Missouri, Nebraska and Georgia link their state LIHTC caps to the federal LIHTC allocation. The other states that have a state LIHTC program have enacted much lower caps. For example, Massachusetts caps its program at $20 million per year (but that cap will drop to $10 million in 2019). Colorado caps its program at $5 million per year, and Oklahoma caps its program at $4 million per year.

Still not convinced of the need for reform? If you are in Cape Girardeau, drive by old Schultz School, where I attended seventh grade. Schultz Senior Apartments LP developed 45 apartment units there at a total cost of $16,784,864. Doing the math, that equates to $372,996 per apartment unit. How often have you heard politicians say “we are going to eliminate waste, fraud and abuse”? There is no sane person alive that would pay $1 for only 42 cents worth of bread. At his first opportunity, Gov. Greitens took direct aim at the inefficient state LIHTC program. He said, “No. More. Giveaways. Politics as usual is over.”

As Gov. Greitens said, “We have to take care of people in Missouri. We have to watch our dollars, and spend them wisely. There are a lot of hard-working people in Missouri who are struggling. They need our help. Good affordable homes for people who are working hard to get by are important. We’re here to work with people across Missouri, on both sides of the aisle, to do what works.”

Milton Friedman, who received the Nobel Memorial Prize in Economic Sciences, said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” Only politicians spending other people’s money can survive paying $1 for 42 cents worth of bread. Please encourage and demand your elected representatives and senators serving in Jefferson City enact real state LIHTC reform that respects the hard earned dollars you pay in state taxes. And when you hear from those who continue to oppose necessary reform of the state LIHTC program remember this: When you rob Peter to pay Paul, you can always count on Paul’s support. Thank you for reading.

Jason Crowell is the commissioner of the Missouri Housing Development Corporation and member of the Governor’s Committee on Simple, Fair and Low Taxes. Crowell, a Cape Girardeau resident, previously served in Missouri’s Senate.