The Virginia Senate unanimously backed the creation of a new tax credit program that could accelerate affordable housing development statewide.
With its passage, the measure heads to the House of Delegates, where, earlier this General Assembly session, a subcommittee tabled a version of the same bill against the wishes of affordable housing advocates from around the state and the Virginia Legislative Black Caucus. Now, supporters of the so-called Virginia Opportunity Tax Credit Program are hoping lawmakers reach a compromise to salvage it.
“There’s probably no legislator from around the state who doesn’t have some sort of housing issue going on, whether it’s Southside or Southwest Virginia, Northern Virginia or points in between,” said Greta Harris, president and CEO of the Better Housing Coalition, a Richmond-based nonprofit that specializes in affordable housing development. “I’m feeling confident the House and the Senate will be able to find common ground and get something passed.”
The COVID-19 pandemic has laid bare how cost-burdened families around the state are when it comes to housing. Thousands of households face eviction and owe back rent balances they could not afford after job and wage losses stemming from the public health crisis. Since last summer, Virginia has doled out millions in rent and mortgage relief to keep people safely housed.
As of 2018, Virginia had a shortage of 400,000 affordable units, according to the National Low Income Housing Coalition. Locally, the dearth plays a direct role in Richmond’s nationally high eviction rate and rising number of people experiencing homelessness.
In recent years, affordable housing advocates have urged local and state leaders to incentivize the creation of new apartments and homes reserved for families making less than median income.
At the same time, financing the construction of such units is becoming more challenging, said Andrew Clark, a lobbyist for the Home Builders Association of Virginia.
“Between the rising cost of land, labor and materials and the challenges of using traditional debt financing, there’s a gap between what you can loan from the bank and what it actually takes to get a project going,” Clark said. “You’ve got to find a way to fill that gap, and that gap is getting bigger every single year.”
Harris and Clark were a part of an 18-person task force that studied the issue with Virginia Housing and Department of Housing and Community Development officials last year. The task force’s report, released last fall, recommended Virginia create a tax credit program modeled after the federal low-income housing tax credit program.
Under the federal program, developers who commit to reserve a certain portion of the units in their construction projects can apply for tax credits. Once approved for them, the developers then sell the credits to investors. In exchange for infusing the projects with private equity, the investors receive credits that reduce their federal tax liability.
In Virginia, developers have turned $200 million worth of federal credits into $2.9 billion in private equity for construction of 22,000 affordable units over the past five years, according to the task force’s report.
Eighteen other states have created similar programs and have seen sharp upticks in the number of affordable units, the task force found. By making $20 million in additional state credits available annually over the next 10 years, Virginia could facilitate the construction of 762 affordable units each year, generate $19 million in local and state taxes annually and support 4,000 jobs, according to the report.
A measure carried by Sen. Mamie Locke, D-Hampton, to create the new program sailed through the Senate and won unanimous passage last week. However, a companion bill carried by Del. Jeff Bourne, D-Richmond, died in a House subcommittee last month.
No one who addressed the House panel or submitted written input opposed the bill. But the committee tabled it in a 7-1 bipartisan vote.
Del. Vivian Watts, D-Fairfax, and others raised questions about the program’s scope and its potential impact on the state budget, estimated at $20 million per year over 10 years, for a total of $200 million.
“Until we can address the revenue issue, we cannot make this kind of commitment at this magnitude,” Watts said at the meeting.
Bourne defended the proposed program, citing the task force’s finding that the state would reap benefits that outweighed the estimated cost.
“We believe that investment is going to yield in excess of that in economic activity, jobs and the social benefit of providing people with good, quality affordable housing,” he said.
The House Finance committee, which Watts chairs, could weigh Locke’s version of the bill this week.