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Editorial

A Rescue for Affordable Housing

The recession has dealt a devastating blow to the federal tax credit program that encourages investors and developers to build affordable housing across the United States. Unless Congress moves quickly to restructure the program, billions of dollars in investment will be lost, along with thousands of affordable housing units and tens of thousands of desperately needed construction jobs.

Created by Congress in 1986, the low-income housing tax credit is responsible for just about all of the affordable housing that gets built in this country. In a typical year, it finances 120,000 apartments, supports more than 100,000 jobs and pumps more than $1 billion in taxes and other revenue into local economies.

Demand for the credits dropped sharply at the start of the recession, when tax liabilities dropped. According to a study by the accounting firm Ernst & Young, private investment in the credits fell from a high of about $9 billion in 2006 to about $5.5 billion in 2008. Anecdotal evidence suggests that investment shrank by another $1 billion last year.

A Senate bill, recently introduced by Maria Cantwell, a Democrat of Washington, would get this important program back on its feet. It would boost investment by as much as $5 billion over the next few years by increasing the value of the credits and allowing investors more flexibility in using them.

Under current law, an investor who has no tax liability in the current year can apply the tax credit to the previous year’s tax bill. But that’s not much help in difficult times like these when profits may have been low in the previous year as well.

The Cantwell bill would reassure investors by allowing companies to apply the credit to tax returns filed as long as five years earlier. In exchange, the investors would be required to reinvest any resulting tax rebate in new tax credits. The bill would make housing tax credits as attractive as the less restrictive credits for investing in wind or solar power projects.

The bill would also extend an existing federal program that allows states to return unused tax credits to the Treasury in exchange for cash, which would help the states finance affordable housing projects.

Americans need affordable housing, and they need jobs. This bill would invest in both.

A version of this article appears in print on  , Section A, Page 26 of the New York edition with the headline: A Rescue for Affordable Housing. Order Reprints | Today’s Paper | Subscribe

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