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The New Tax Plan: Good for Affordable Housing?

Written by Posted On Wednesday, 14 February 2018 05:03

Now that the Trump administration has created a new tax plan, a question that many have asked is “how will the tax plan affect affordable housing?” Ruel Hamilton, in particular, is watching these events closely. As the CEO and founder of Dallas-based AmeriSouth Realty, he has built a career and reputation around renovating decrepit apartment buildings and turning them into affordable housing for the middle class in the Dallas metro area.

Hamilton’s real estate investment company specializes in the ownership, development and acquisition of multi-family projects within the affordable housing industry. He primarily owns and operates Class C multi-family apartment communities, including some that were developed using Low Income Housing Tax Credits (LIHTC’s). Hamilton believes that keeping and maintaining older properties is the key to fixing the affordable housing crisis. Accordingly, he pays close attention to bringing aged, crime ridden or poverty-stricken housing back to life with rehabilitation and revitalization but is worried about this industry due to the latest tax changes.

There has been a lot of discussion about this important topic, and the initial findings are less than hopeful. If anything, affordable housing risks becoming not so “affordable” pretty soon.

First off, the bill retains the 4% Low Income Housing Tax Credit (LIHTC) and the Historic Tax Credit. While this is a good thing, the reduction of the corporate tax rate from 35% to 21% is where there is cause for concern.

Lowering the corporate tax will lower the value of these credits, which could decrease the amount of return corporations receive on their investments. The result? A reduction in affordable housing options for those on tight budgets with limited income.

The damage from these tax cuts is already being felt across the country. For example, Kate Hartley, the director of the San Francisco Mayor’s Office of Housing and Community Development, said the lower corporate tax rate had already increased the cost of building affordable housing in the city “by roughly $50,000 per unit.”1

Rent prices have been steadily increasing over the years, and many households are feeling the pinch. According to the State of the Nation’s Housing Report from Harvard’s Joint Center for Housing Studies, 39 million households can’t afford their housing.  

Many experts suggest spending no more than 30% of your income on housing, but over 1/3 of renters exceed that amount, with another 19 million paying more than 50% of their income on housing.2

This trend is sure to continue, thanks to rent increases that are on the horizon: It’s possible that some apartment dwellers could see their rent increase by a whopping 40% in 2019.

Another critical factor in the bill that should be noted is the elimination of private-activity bonds. According to Rachel Fee, Executive Director of the New York Housing Conference, the elimination of the bonds doesn’t bode well for those in need of affordable housing: “this was the worst case scenario that we were bracing for,” she says.

This “worst case scenario” doesn’t bode well for lower income or distressed neighborhoods. It is critical people are aware of these tax changes and how they will affect their home owner taxes and property taxes.

Dallas Developer Ruel Hamilton believes it is a mistake to eliminate affordable housing, which could happen with this new tax plan. However, instead of forcing these people out of their homes, Hamilton is doing just the opposite: he’s looking to help them stay where they are and simultaneously improve their neighborhoods from the inside out.

One of the best ways to do this is by investing in the local school system. Hamilton elaborates: “Given the wide-ranging ripple effects of better schools on local communities, direct support for local schools in distressed areas isn’t just the right thing to do, it makes eminent business sense.”

Hamilton himself has invested more than $100,000 to the Dallas Independent school District, supporting seven elementary schools and one middle school.

Hamilton explains why he’s investing in these communities, in spite of the impending changes:

“The money I’m spending to help fix these schools pales in comparison to what it would take my company to build, develop, or revitalize affordable multifamily properties in more prosperous areas in the Dallas suburbs. This is not just altruism for the sake of altruism. It is an investment in the future of these neighborhoods. I’m fully expecting a return, as property values rise and make my profitable projects even more so.”

Everyone deserves to have a nice, affordable place to live, and Ruel Hamilton has dedicated his career to making that a reality. Like many advocates of affordable housing, he understands how important affordable housing is to families and communities alike. Not only in Dallas, but across the country in other bustling metros as well.

Despite the challenges the new tax plan may have created, Hamilton will continue his efforts to make affordable housing a reality for all.



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