July 15, 2013
The Honorable Maria Cantwell
United States Senate
311 Hart Senate Office Building
Washington, D.C. 20515

Dear Senator Cantwell,

I am writing on behalf of the Washington Low Income Housing Alliance, as well as the undersigned organizations. The vision of the Housing Alliance is to ensure that everyone in Washington State has the opportunity to live in a safe, healthy, affordable home in a thriving community. As the Senate considers comprehensive tax reform through the Senate Finance Committee’s “blank slate proposal,” we ask that you make solving the affordable housing crisis a priority. We believe the best way to accomplish this is to protect the Low Income Housing Tax Credit, and to look into ways we can reform the Mortgage Interest Deduction to benefit more homeowners and also fund housing affordable to America’s poorest families.

Our country continues to face a growing affordable housing crisis.  The number of low-income people who need affordable housing continues to grow, while the supply of safe, healthy, affordable homes continues to shrink nationwide. Families who should be able to afford a home and still have enough money for basic needs like groceries, transportation, and childcare are instead paying more than half of their income just on rent and utilities alone. In Washington State, 235,387 households – 24% of all of our renters – are facing this severe housing burden. Protecting the Low Income Housing Tax Credit and reforming the Mortgage Interest Deduction are both important tools for how we can remedy this situation.

The Low Income Housing Tax Credit (Housing Credit)

The Housing Credit has been our most successful tool for addressing this serious social problem by producing close to 100,000 affordable rental homes annually. Without the Housing Credit, it is unlikely that any organization or developer would have been able to produce any of this affordable housing.

Here in Washington State, the Housing Credit has helped finance 56,817 affordable apartments since its creation in 1986. This investment has additionally created 65,908 jobs, $5 billion of local income, $488.6 million in state and local revenue, and $1.4 billion in federal revenue.

The Housing Credit accomplishes all three of the Senate Finance Committee’s stated goals for policies they prefer: it grows the economy, makes the tax code fairer, and it effectively promotes the important policy objective of keeping Americans affordably housed. We strongly urge you to champion the preservation of the Housing Credit program as part of tax reform, and we thank you for continuing to be a leader on this issue. We additionally support your efforts to improve the Housing Credit by changing the formula used to determine the credit rate, such as in the legislation you introduced in the 112th Congress (S. 1989). And we hope the opportunity arises in tax reform to include those improvements to the Housing Credit.

Reforming the Mortgage Interest Deduction

The Housing Credit is widely considered to be the most effective affordable rental production tax program in the history of the nation, but it accounted for just 3.3 percent of all federal housing expenditures in FY 2012. The Housing Credit alone will not be enough to solve the affordable housing gap. We need additional investments in affordable housing.

The idea of the Senate’s “blank slate” approach is to rethink the parts of the tax code that already exist and ask ourselves how they could work better. In that spirit, we believe that it’s time to take a look at our nation’s largest investment in housing, the Mortgage Interest Deduction and consider a proposal to convert the deduction to a 15% non-refundable tax credit while reducing the amount of mortgage eligible for a tax break from the current $1 million down to $500,000.

The way the Mortgage Interest Deduction is currently structured is an inefficient and ineffective way for the government to subsidize housing. Right now, 16 million homeowners with a mortgage get no benefit from the deduction whatsoever because they don’t itemize their taxes. Converting the deduction to a non-refundable credit would extend the benefit to these homeowners, 99% of whom make less than $100,000 per year.

The proposed changes would also raise an estimated $197 billion in revenue over the next ten years. There is bipartisan support for making sure some or all of the savings achieved through modifying the mortgage interest deduction be directed to housing production programs that serve the very poor, such as the National Housing Trust Fund. The Common Sense Housing Investment Act (H.R. 1213) would make these changes and then direct $109 billion to the National Housing Trust Fund, $14 billion to the Housing Credit, $54 billion to Section 8 Housing Choice Vouchers, and $18 billion to the Public Housing Capital Fund.

Tax reform gives us a chance to reimagine not just our taxes, but the whole landscape of the American economy. Let’s imagine an America with enough affordable housing where no child does homework in a car, no veteran sleeps under a bridge, and where truly every American has a safe, healthy, affordable place to call home.

Please do not hesitate to contact Ben Miksch on my staff at (206) 442-9455 x204 for more information. Thank you for your consideration.

Sincerely,

Rachael Myers
Executive Director
Washington Low Income Housing Alliance
1411 Fourth Avenue, Suite 850
Seattle, WA 98101