Talk of Federal Tax Cuts Chills Affordable Housing Market

BOSTON — The planned A.O. Flats housing development in this city’s Jamaica Plain neighborhood was billed as an oasis for low- and middle-income families, a place where they could get affordable housing in an increasingly affluent area.

Financing was nearly in place and construction was set to begin until President Donald Trump and Congress started talking right after the election about delivering the biggest overhaul of the federal tax code in more than 30 years. Those plans include simplifying tax law as well as cutting taxes, especially for the better-off and for corporations.

Suddenly, because of the proposed slash in corporate tax rates, federal low-income housing tax credits, the key to financing almost every affordable housing project in the nation, looked like they might be worth less to investors. If the corporate tax rate, now at 35 percent, is cut to 20 or even 15 percent, the credits would not be as attractive to investors who use them to lower their tax liability in return for financing housing projects.

“Investors paused and said, ‘Wait a minute, if I’m getting a stream of tax deductions at a tax rate of 35 percent now, and I’m pretty confident the rate is going to be lower … I’m going to hold off here and figure out what’s going on,’ ” said Bart Mitchell, CEO of the Community Builders Inc., a nonprofit that coordinates low-income housing projects, including A.O. Flats.

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