AUGUSTA — In the coming days, a congressional conference committee will reconcile the differences between the U.S. House and Senate bills to modify the U.S. tax code. The outcome could affect whether more Maine seniors and families will be able to move off waiting lists and into affordable housing; whether prospective homebuyers will be able to purchase their first house; and whether construction workers will be building multifamily housing vitally needed in a state where housing is becoming increasingly unaffordable.
Under the House plan, the tax-exempt status of private activity bonds would be eliminated, wiping out a critical tool that Maine has counted on for decades to provide below-market-rate mortgages and build affordable rentals for people who earn 50 percent to 60 percent of an area’s annual median income, or between $22,300 and $34,680 for a two-person household.
The Senate version retains private activity bonds. It’s imperative that they are kept in the final version; otherwise, Maine could face a loss of nearly 2,000 affordable-housing units in the next decade, and thousands of prospective homebuyers would not be able to purchase their first home.
The private activity bond program, created in 1968 and modified in 1986, is held in high regard. Here’s how it works: Investors purchase bonds that earn interest that is not subject to federal taxes. They receive a lower interest rate on the bond, and that lower rate is passed on as a low-rate home mortgage or development loan.
In addition to providing below-market-rate loans, private activity bonds are required to access a key component of the federal Low Income Housing Tax Credit program. Under this program, investors purchase an ownership interest in the rental project and receive a federal tax credit for a 10-year period.
Private activity bonds, together with low-income housing tax credits, finance about 300 affordable apartments each year in Maine. More than 1,075 units were constructed or rehabilitated from 2010 to 2016 through a $147.5 million combined total investment of private activity bonds and housing tax credits. Meanwhile, thousands of seniors and lower-income wage earners have their names on waiting lists for when apartments become available.
Since 2013, the bonds and tax credits have financed the construction or rehabilitation of 587 apartments for seniors and families in 10 southern Maine communities. They include the Malcolm E. Noyes Apartments in Westbrook (38 new units for seniors) and The Ledges in Saco (84 renovated units for seniors).
Also, because of private activity bonds, almost 3,900 first-time buyers have purchased a house using our First Home Loan program in the past five years.
Through these crucial programs, Maine gains private-sector investment that serves an important public purpose – providing affordable housing, which is desperately needed in most of the state. According to MaineHousing’s Affordability Index, in 2016 nearly 58 percent of renter households statewide couldn’t afford the median two-bedroom rent of $872 (plus utilities), and almost 53 percent of total households could not afford the median home price of $184,000.
For homebuyers, Cumberland, Hancock, Knox, Sagadahoc and York counties are unaffordable in comparison to the state’s other 11 counties. In Cumberland County in 2016, the median home price was $256,000 and the median income was $59,748. Sixty percent of households there cannot afford the median home price.
For renters, all Maine counties except Knox and Lincoln were unaffordable in 2016.
Putting a chill on affordable-housing development would affect Maine’s economy, too. In 2015-2016, 29 housing projects that received $180 million from MaineHousing and all of our leveraged sources added 1,120 units and created 2,444 jobs with $74 million in wages, according to an economic impact study by the University of Southern Maine. The jobs comprised 17 percent of annual residential construction employment.
MaineHousing was established by the Maine Legislature nearly 50 years ago with the mission to assist Maine people in obtaining and maintaining quality, affordable housing and services suitable to their housing needs.
I’m proud of the work our agency has done in collaboration with affordable-housing developers and lenders in Maine to keep costs down while meeting the needs of families, seniors and veterans. Congress should not eliminate successful programs with proven outcomes.
Mainers are counting on us.
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