As noted in a prior post, the affordable housing industry is struggling to make ends meet after equity pricing took a dive in response to the decreased corporate tax rate under President Trump’s tax reform plan. While some reprieve was granted by the increases in tax credit allocations and appropriations for affordable housing programs under the 2018 federal spending plan, developers are still struggling to fill funding gaps. One city is proposing a creative way to funnel more money toward affordable housing: On April 16, Denver Mayor Michael Hancock proposed a 2% increase in the special tax on recreational marijuana, with the additional revenue generated to be earmarked for the City’s affordable housing fund.
On March 23, President Trump signed into law the Consolidated Appropriations Act, 2018, a $1.3 trillion spending package that includes a 12.5% increase in low-income housing tax credit allocations over the next four years, along with funding increases for several affordable housing programs. This is welcome news to affordable housing developers who have been facing funding gaps as a result of reductions in the corporate tax rate under the Tax Cuts and Jobs Act enacted in late 2017, which led to reduced pricing from equity investors.