Nicolas Retsinas, the man many in the housing industry who hoped would replace Henry Cisneros as housing secretary (not that Andrew Cuomo, who got the post instead, has done a bad job), is advancing a bold new initiative aimed at moving low-income renters into homes of their own.

Retsinas, a former state housing officer in Rhode Island before becoming FHA commissioner and assistant at HUD under Cisneros and then, briefly, under Cuomo, is backing a targeted tax credit to help low-income renters seeking homes in "underserved" neighborhoods come up with the money to cover their closing costs and 18 percent of the house price.

His low-income second mortgage tax credit is patterned after the low-income housing tax credit program, a popular vehicle that is responsible for the development of perhaps a million affordable apartments for low-income renters since 1987.

Under that program, state housing agencies allocate tax credits in exchange for equity investments in the acquisition, development or rehabilitation of affordable apartments. Developers then sell those credit to investors, who use them to offset their tax liabilities. The equity raised from selling the credits reduces the debt needed to finance the project and also allows developers to lease apartments at below-market rents.

Now Retsinas, who currently heads Harvard University's Joint Center for Housing Studies, wants to replicate that program for low-income buyers. Under his proposal, people who investment in below-market rate second mortgages also would receive tax credits, which they too could sell on the open market. They money the receive would be used for low-cost second mortgages that cover the buyer's closing costs and an 18 percent downpayment. Does his idea have any chance at receiving more than passing attention from federal lawmakers? It's hard to tell. Even though there's no question the original low-income tax credit has been a resounding success, supporters are currently having surprising difficulty garnering support for increasing the Congressionally-imposed cap on both the credit and mortgage revenue bonds.

Sen. Jack Reed, GRI, said this morning he would introduced the Home Ownership Tax Credit Act, a measure that would allow Uncle Sam to issue tax credits to lenders that offer either low or no-interest second mortgages to low-income families. Under the plan, he said, a family earning just $20,000 a year could buy a $72,000 house with only $1,000 down and a monthly mortgage payment of just $592.

Sen. Reed is a first-termer, but he does sit on the politically correct Senate Banking, Housing and Urban Affairs Committee. Unfortunately, the key panel in this case is the Senate Finance Committee, not Banking. But Retsinas still has some political clout left over from his days in the Clinton Administration. Furthermore, the plan addresses the dual barriers faced by low-income buyers, wealth and income. It also steers money into inner cities and other neglected areas where most low-income Americans reside. And better yet, is appears to be an ingeniously workable plan.

Perhaps more importantly, though, it wouldn't create a new bureaucracy or a costly new subsidy program. Since state housing agencies already issue low-income housing tax credits, it should be relatively easy for them to add second mortgage credits to their arsenals. And since Congress already allocates the housing tax credits to states based on their populations, lawmakers could simply dole out the mortgage credits in much the same way.

"Notwithstanding the rhetoric about the glories of home ownership, for low-income families the government has spent its energies and money on rental housing," says Retsinas. "But unless Congress moves beyond the bully pulpit to craft targeting programs, few low-income renters will move into their own homes."

Published: June 21, 1999

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