The Paseos in Summerlin, with the Spring Mountain in the background. (Las Vegas Review-Journal)
Nevada lawmakers have taken the first step toward copying the federal government’s most effective program to fund affordable rental housing.
A bipartisan committee of lawmakers on Thursday unanimously voted to draft a bill to create a Low Income Housing Tax Credit Program during the 2019 legislative session.
The program would give private investors a dollar-for-dollar reduction in state tax liability for helping to finance the creation or preservation of affordable rental housing. The housing would be subject to rent restrictions and tenant-income limits for 30 years.
Committee chairwoman and state Sen. Julia Ratti, D-Sparks, said the creation of such a program would enable more public-private partnerships.
“Housing is very market driven, and when we need housing for people at lower income levels the market doesn’t necessarily produce that,” she said. “A way that we can maximize the federal (tax-credit) program is to contribute some state dollars and increase the number of affordable units we’re able to build each year.”
Aside from the creation of Nevada’s subordinate loan Growing Affordable-Housing Program in 2015, the proposed tax-credit program would be the state’s first new funding source for affordable housing since the Low-income Housing Trust Fund was established some 30 years ago.
Committee members directed Legislative Counsel Bureau staff to write a bill draft which would create a four-year pilot program launching in 2020. As much as $10 million of transferable tax credits could be allocated each fiscal year, and unused credits could roll over year-to-year.
The credits could be declared against Nevada’s modified business, insurance premium and gaming percentage fee taxes.
The Nevada Housing Division would be responsible for choosing which projects receive the credits, which would be allocated to developers who could sell them to investors to fund their projects.
“The Nevada Housing Division already manages and implements the federal tax-credit program, so the infrastructure is already there and in place,” said David Paul, director of real estate development at Nevada HAND, a nonprofit developer that’s built some 3,800 low-cost apartments in Nevada over the past 25 years. “I know many developers besides ourselves have multiple projects that but for some additional financing they could start very quickly, so it’s a program that’s ready to go and have an immediate impact.”
A state tax-credit program would work in tandem with its federal counterpart, which lost some demand due to recent federal tax reform lowering the corporate tax rate.
More than 200,000 units of affordable housing are needed in Clark and Washoe counties combined. Ratti said that the federal tax-credit program creates about 800 units of affordable housing each year. Infusing another $10 million a year could create up to another 600 units.
The proposal has the support of Nevada REALTORS professional trade association, which has more than 16,000 members throughout the state.
“As an industry, the Realtors support anything that can create more affordable homes, can help people afford their own homes or stay in their apartment,” said Kevin Sigstad, the association’s legislative chairman.
More than a dozen states have tax-credit programs. At least one national expert on affordable housing sees tremendous value in it.
“When you have a grant program the state has a tremendous obligation to underwrite,” said Michael Novogradac, managing partner of the San Francisco-based national accounting firm Novogradac & Company. “With a tax-credit program you look to the market to do the underwriting.”
Committee members also voted Thursday to pen a letter to members of Nevada’s congressional delegation urging them to support the bipartisan Cantwell-Hatch Act, which would increase federal tax-credit allocations for affordable housing by 50 percent.
Contact Michael Scott Davidson at firstname.lastname@example.org or 702-477-3861. Follow @davidsonlvrj on Twitter.