A Dependable Advocate

9 min read

Senator Cantwell argues for more LIHTC

In 2011, on a Labor Day break from her job as the State of Washington’s junior Senator, Maria Cantwell joined a party of five to climb 14,000 feet to the peak of Grand Teton.  When asked how she negotiated one particularly steep and dangerous segment, Cantwell replied, “I didn’t look down.”

On March 7 of this year, in collaboration with Republican Senator Orrin Hatch of Utah, and with the bipartisan support of nine other senators, Cantwell introduced the Affordable Housing Credit Improvement Act of 2017, highlighted by a 50 percent increase in Low Income Housing Tax Credits, and began another steep climb. This 115th Congress may be dominated by Republican lawmakers in search of budget cuts to counteract tax cuts. But don’t expect Maria Cantwell to back down. Addressing homelessness and the need for more affordable housing has been a priority of the senator that best-selling author Ron Suskind once described as “The irrepressible Maria Cantwell,” for close to a decade now.

In 2009, at the tail end of the Great Recession during which tax liabilities and, as a result, private investment in tax credits dropped significantly, Cantwell first proposed an amendment to the American Relief and Recovery Act to encourage investment by accelerating benefits of the credit. In 2010, Cantwell introduced a bill that increased the value of the credits and would allow investors more flexibility, including a five-year carry back of deductions.  In 2015, Cantwell succeeded in making the nine percent LIHTC a permanent rate as part of a congressional omnibus spending bill. And in 2016, Cantwell and Hatch first proposed a version of the current bill, which faded when Congress was unable to pass a budget.

Speaking before the National Association of State Housing Agencies in Washington, DC on the day prior to releasing the 2017 bill, Cantwell said, “We need to learn to crystallize this issue in an even more emphatic way. Our affordable housing crisis in America is growing deeper every day. In this decade, we have had an explosion of demand and a contraction of supply.”

Crystalizing the Issue
Along with the release of the bill, Cantwell’s office issued a report to explain its necessity entitled “Meeting the Challenges of the Growing Affordable Housing Crisis.” “We need to be able to unpack this issue for my colleagues (in Congress),” the senator said.

What she unpacked is a trunkful of data and historical developments that paints a frightening picture of where we are as a society and yet tells a very sensible story of how we got here.

Following the Bush Administration’s over-eager attempt to significantly increase homeownership via unjustifiable loans that laid a path towards far too many foreclosures, seven million American families lost their homes. At the same time, the boomer generation reached retirement age where a percentage prefer multifamily living situations to single homes. This created the largest increase in the number of renters in any decade. At the same time as the need for apartments was increasing, we lost 13 percent of the housing stock to crime and time. So as the demand increased, availability decreased and, as a result, rent costs rose.

So now we find ourselves 7.4 million living units short.  And another 11.2 million renters are paying more than 50 percent of their earnings on rent.

“This crisis demands action by our leaders,” the report reads. “If we do not act, the number of Americans driven into poverty by crushing rents will continue to rise. Research from the Harvard Joint Center for Housing Studies and Enterprise Community Partners shows that with no action by 2025, nearly 15 million Americans could be spending half of their monthly income on rent—an increase of 25 percent.”

Beginning to Solve the Problem
The Cantwell/Hatch Bill doesn’t look to reinvent the wheel, but instead to “build on the success of the LIHTC program that has leveraged over $100 billion in private sector investment and created 3 million affordable housing units spread among all 50 states.”

The AHCIA proposes:

  • Expanding the annual LIHTC allocation of nine percent credits by 50 percent, which, according to the Bipartisan Policy Commission, will allow the creation or preservation of 400,000 additional new units or a total of 1.3 million over the next decade (and also create 452,000 new jobs).
  • Promoting broader income mixing in LIHTC projects. Historically the LIHTC program has encouraged preference for the lowest-income segment of the population. But the rents they can pay even with subsidy make the buildings financially unfeasible especially in the higher cost markets, where the most jobs usually are available. While the local workforce—teachers, police, firemen, municipal workers—and recent college graduates, seek to live in the cities, they no longer can afford to. Not expanding this program earlier has vastly expanded the needs. AHCIA reforms the LIHTC income limitation formula to promote greater income mixing and financial feasibility.
  • Allowing states more flexibility in financing projects targeting homeless individuals and extremely low income families. State housing credit allocating agencies are now permitted to provide a boost (more housing equity) to make development financially feasible.  AHCIA increases that boost.

Growing up with politics
Maria Cantwell grew up in a home in Indianapolis where politics dominated the dinner conversation. Her father Paul F. Cantwell worked as a county commissioner, city councilman, state representative and chief of staff for Congressman Andrew Jacobs Jr. After earning a bachelor’s degree in public administration at Miami of Ohio, she relocated to the state of Washington to work on the unsuccessful presidential bid by California Senator Alan Cranston.

By the time she was 28 years old, Maria was elected to the Washington State House of Representatives. After serving three terms, she was elected by Washington’s 1st Congressional District, to the United States House of Representatives. In 1995, Cantwell lost her re-election bid amidst a Republican sweep by 2000 votes, became discouraged by politics and took a job as vice president of marketing for an innovative tech company, Real Networks, that focused on linking television and radio to the internet.  When she joined RealNetworks it was a company of 60 in one room above a pizza parlor filled, according to Seattle Times reporter Diane Searcey, with “pony tails, tattoos and dreadlocks,” quite a contrast for a former state rep whose style leaned towards suits. Her greatest thrill there was the first broadcast of a major league baseball game (between the Mariners and Yankees) on the internet. “There were moments like that,” she said, “when you felt like you were part of history.” Within five years, Cantwell was running a department with 100 employees in a company of 800 and the growth in the staff was mirrored by the growth in the stock’s value and consequently Cantwell’s worth.

Cantwell has a Debra Winger kind of spunk. People working for her described her as “driven and demanding.” The combination of her determination and new found wealth led her to challenge three-time Senator Slade Gorton in the 2000 election. She won that by just 2500 votes. But in 2006 she won reelection with 57 percent of the state vote and in 2012 she won with over 60 percent.

In the Senate, some have referred to her as a “west coast Elizabeth Warren.” In addition to affordable housing, Cantwell has been a staunch advocate for natural resources and small businesses. She has had her moments of feistiness. Coming from a state with a significant Native American population, she proposed eliminating the National Football League’s anti-trust exemption as punishment for the Washington Redskins not changing their name. Though a supporter of the Affordable Care Act, colleagues criticized her for backing off the single payer option, though she preferred it, but argued she could not find enough votes in the Senate to pass the act without a different approach.  Wiseguy opponents have labeled her “Senator Can’t-smile,” but what progressive civil servant can smile in a chamber where venom is more apparent than good sense?

Representing Washington, she is faced with 390,000 constituent households that pay more than half their income for rent, 16 percent fewer available rental homes than the average in other states, and, since 2000, a 2.4 percent decline in income coupled with a 7.6 percent rise in median rents. The Seattle Times has reported that rents in Seattle have grown at a higher rate than in any other city in the country. According to Zillow, rents in Washington have risen four and a half times faster than the national average.

Are we dreaming?
What is the likelihood of Senator Cantwell successfully navigating her bill through the current Congress?

The LIHTC program is legislated by Congress, overseen by HUD and administered by the Internal Revenue Service, which allocates the credits and is responsible for audits.

The president’s first pass at a FY2018 budget proposes a $6 billion cut in HUD financing. Among the community enrichment programs mentioned for elimination are Community Block Grants and Obama’s Choice Neighborhoods program, which brought cabinet departments together to conceive and fund urban development. Not a good omen.

On the other hand, the president is a builder and one would think he understands what it takes to finance construction and the role home plays in stabilizing lives.  Aspects of the LIHTC program that may garner bipartisan philosophical support include the fact that this is a model for private/public partnerships that uses an average of $6 billion in uncollected tax revenue per year to attract significantly more than that in private investment. LIHTC is also a model federal project where much of the responsibility is handed off to the states, presumably a priority of the current majority.

The last increase in the LIHTC program was made by the 104th Congress in a Lame Duck session at the end of 2000 prior to the inauguration of George Bush, the first year of the Bush Administration. In that Congress, Republicans held a 55-45 majority in the Senate and a 223-211 majority in the House. At the time, the credits had been awarded at $1.25 per capita since the program’s inception 13 years prior, while construction costs continued to rise so each dollar resulted in less new affordable housing. At that time, the per capita amount allocated to states was raised to $1.75 over two years, plus an annual inflation adjustment. Currently, allocations are awarded at $2.35 per capita.

Cantwell now faces a 52-48 Republican majority, but along with Senator Hatch also already has Republican Senators Orrin Hatch, Dean Heller (NV), Lisa Murkowski (AK) and Todd Young (IN) as co-sponsors. But the mountain for Senator Cantwell to climb is the House’s 246-188 majority. On this trip, you need someone who won’t look back or back down.