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State tax credit for affordable housing development receives big push from labor, business, advocates

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Illinois

* Press release…

Illinois’ affordable housing shortages have reached crisis levels in Chicago and other communities, fueling needed public policy discussions about short-term and long-term solutions. State legislators and housing advocates say one important piece of the puzzle is the Build Illinois Homes Tax Credit, and they have a new, influential ally in organized labor.

The Illinois Housing Council has led the push in Springfield for the proposed state tax credit to drive new investment in affordable housing development, an issue that has new energy amid the migrant challenges facing Chicago and homelessness and under-housing growth elsewhere. The facts are staggering:

• Illinois now has one of the nation’s highest housing deficits – with 64 percent growth in just the last decade
• 20 percent of our low-rent apartments have vanished since 2011
• Nearly 300,000 more affordable rental homes must be built to help those most in need across the state
• Illinois has invested $225 million in federal funds since the pandemic into the development of affordable housing, but those federal funds have come to an end

Enter the Build Illinois Homes Tax Credit, as proposed in Senate Bill 3233 by Sen. Robert Peters and House Bill 4909 by Rep. Dagmara “Dee” Avelar. The legislation was introduced Wednesday at a Statehouse news conference by IHC leadership, the two legislators sponsoring the effort, and new support from the Laborers’ International Union – Midwest Region which runs the Laborers’ Home Development Corporation to build affordable housing in underserved communities.

“The Build Illinois Homes Tax Credit fits well with our mission to create more quality, reasonably priced housing for working families and seniors, and we call on our leaders in Springfield to make its passage a priority as we make a strong investment in affordable housing,” said Sean Stott, Director of Governmental Affairs for LiUNA-Midwest Region.

The tax credit mirrors the highly successful federal Low-Income Housing Tax Credit, which quickly runs out of money under high demand each year. The state credit would allow more affordable housing developments by giving developers credits to exchange with private investors to reduce mortgage debt and make the apartments more affordable for renters.

The best part? The proposed tax credit program limits the state’s annual out-of-pocket cost for credits and is structured as a “pay-for-success” model: investors only receive credits after construction is complete and qualified tenants move in. Under the current grant programs the state runs, the state’s costs are high up front, and developments can be put in jeopardy because of the uncertain nature of the year-to-year funding approach.

As proposed, the $20 million annual program over six years would generate up to 1,150 affordable homes and apartments, more than $650 million in economic benefits over a decade, and more than 7,000 jobs.

* Crain’s Chicago Business reports that the IMA is also supporting the bill..

Illinois is about 289,000 units short of the affordable rentals needed statewide, according to Housing Action Illinois. That is, for every 100 households making 30% or less of the average income, there are 36 affordable rental homes. […]

The shortage creates a barrier to employment, Mark Danzler, president and CEO of the Illinois Manufacturers’ Association, said in a statement emailed to Crain’s. “To ensure the continued strength of Illinois’ manufacturing sector,” Danzler wrote, “we must invest in our workforce. As housing costs continue to climb, it is essential that the state look for innovative ways to increase affordable housing.” […]

The groups are pushing for the Build Illinois Homes Act now in order to get the tax credit included in next year’s state budget. While the credit would not require any new state expenditure, it entails a loss of revenue, in the form of taxes not collected because of the credits taken by developers. Typically, developers sell the tax credits to investors in exchange for funds that build the project.

Thoughts?

posted by Rich Miller
Wednesday, Apr 17, 24 @ 12:41 pm

Comments

This doesn’t address one of the primary causes of the shortage.

Local officials refusing to approve new developments.

A few months ago, a council member for a nearby large city was actually bragging during a council meeting about how many residential developments he helped to kill off. One of the developments was to repurpose a failing mall into residential apartments. Similar to what was successfully done in Aurora with parts of the Fox Valley Mall. But it was killed before it ever came up for a council vote.

This proposal doesn’t move the needle at all in situations like this, which currently exist in varying degrees of obstruction in many suburbs and almost all exurbs.

This proposal is a carrot. Many municipalities instead need a stick.

Comment by TheInvisibleMan Wednesday, Apr 17, 24 @ 1:01 pm
20 million per year over 1150 homes or apartments works out to 17K per year per home or apartment. Times 6 years is 104k per home or apartment.

Am I reading that right? How much mortgage reduction per home or apartment will be the result of this approach?

Comment by MikeMacD Wednesday, Apr 17, 24 @ 3:04 pm
A low-income housing tax credit modeled after Invest in Kids would be interesting to see.

Comment by thechampaignlife Wednesday, Apr 17, 24 @ 6:54 pm