Washington, D.C.–U.S. Senator Mike Crapo
(R-Idaho), Ranking Member of the U.S. Senate Finance Committee, delivered the
following remarks at hearing entitled, “The Role of Tax Incentives in Affordable
Housing.”
The text of Ranking Member
Crapo’s remarks, as prepared, is below.
“Thank
you, Mr. Chairman.
“Last
week we learned that consumer price inflation spiked to 9.1 percent, the
highest in more than 40 years. The shelter component of the consumer
price index was up 5.6 percent in June relative to a year earlier, and rents
were up by nearly 6.0 percent.
“To
continue battling inflation, which was fueled by last year’s partisan American
Rescue Plan, the Federal Reserve must aggressively raise interest rates, and
may raise rates later this month by as much as a full percent.
“Inflation
must be contained, or we run a risk of the Fed having to repeat what it did in
late 1980 to combat runaway inflation. Painfully, then, overnight
interest rates were driven to nearly 20 percent, which crushed economic
activity, including housing markets, and helped lead to a deep and long
recession.
“With
higher interest rates set by the Fed, higher mortgage rates follow, making it
all the more challenging for Americans to buy homes.
“Housing
affordability is a critical issue in Idaho and all across the country.
“Nationwide,
there is a shortage of about 7 million affordable rental homes available to
lower income Americans and the gap between demand and supply increases each
year. To provide more affordable housing, there are existing tools in the
tax toolbox that provide incentives for builders to create more affordable
homes.
“The
Low-Income Housing Tax Credit—or LIHTC—for example, is responsible for
generating a majority of all affordable rental housing created in the U.S. today
and generally enjoys bipartisan support in Congress.
“In
Idaho, there are currently 284 LIHTC projects located across the state
providing 12,000 plus units. These projects vary in size and are split
roughly between urban and rural, with about 72 percent targeted toward families
and 28 percent for seniors and the elderly.
“One
such project is the Valor Pointe Apartments in Boise, which targets chronically
homeless veterans.
“Several
members of this committee have been active in working to improve existing
affordable housing credits and to create new incentives.
“Senators
Young and Cantwell, as well as several other members, introduced the Affordable
Housing Credit Improvement Act, which would expand and strengthen LIHTC for
developing and preserving affordable housing.
“Senators
Portman and Cardin introduced the Neighborhood Homes Investment Act, which
would create a federal tax credit that covers the cost difference between
building or renovating a home in urban and rural areas.
“Numerous
other Finance Committee members are also interested in finding affordable
housing solutions. Thank you all for your hard work. While LIHTC
and other credits are part of the solution to developing affordable housing, we
must address other drivers that are increasing housing costs generally.
“Foremost
in the current economy is the need to reduce inflation. Unfortunately, it
has been allowed to run rampant, and necessary Federal Reserve actions will
raise the cost of housing. Builders are also feeling inflation’s effect
through more expensive building materials. And, painfully high fuel
prices continue to put even more pressure on builders’ budgets, making it is
even more expensive to get materials to construction sites.
“Additionally,
several economic factors have led to a shortage of affordable housing.
“One
way to alleviate the shortage would be to look into more manufactured
housing. During his time at HUD, former Secretary Carson created the
Office of Innovation to evaluate new ways to provide housing, and in doing so
highlighted the improved efficiency and suitability of manufactured
homes.
“Zoning
laws and regulatory barriers, which are often uncoordinated, unnecessary, or
overly cumbersome, also present challenges to affordable housing by creating
excessive costs that restrain development of affordable housing. Many of
the markets with the most severe shortages in affordable housing have the most
restrictive state and local barriers to development.
“We
must work to reduce regulatory barriers, which requires outside-the-box
approaches, as well as teamwork from local, state and federal governments, and
the private sector.
“This
includes initiatives like Opportunity Zones that were part of the Tax Cuts and
Jobs Act, an area where Senator Scott has done a great deal of good work.
“Data
released as of March 24, 2022, by the Opportunity Zone Fund Directory shows
that $49.18 billion has been committed in anticipated investments and 60
percent of those funds target investments in affordable housing and community
development.
“Homes
are more than just physical structures. Homes are a foundation for wealth
building, family stability and community cohesiveness. It is critical
that we make the American dream of homeownership as attainable for as many
people as possible, which will continue to foster the economic success of the
nation.
“I
look forward to discussing ways to ensure affordability and accessibility of
home ownership with today’s witnesses.
“Thank
you, Mr. Chairman. I yield back.”