Ohio is witnessing a shortage of affordable housing, putting pressure on low-income people and middle-class home renters and buyers. To address this, lawmakers in the state are considering an affordable housing tax credit in Ohio to develop more affordable housing.
Affordable Housing Tax Credit In Ohio – What’s The Need?
It is estimated that the state is witnessing a shortage of about a quarter of a million affordable housing units. The lack of affordable housing is straining the budget of low-income and middle-class home renters and buyers.
A 2020 report from the Coalition on Homelessness and Housing in Ohio found that only 3 of 10 of the most common jobs in the state paid a sufficient salary needed to afford a modest two-bedroom apartment.
Addressing the lack of affordable housing issue is a top priority for Republicans, including Rep. Gail Pavliga, who has come up with legislation (House Bill 3) to create a state housing tax credit. The legislation would enable the state to withdraw federal housing credit resources. Rep. Lauren McNally is the co-sponsor of the bill.
“This proposal leverages more federal funds, increases the attractiveness to invest in Ohio, creates thousands of jobs, generates meaningful economic impact and tax revenue, and creates more affordable housing for our citizens,” said Pavliga.
In a testimony before the House Economic and Workforce Development Committee, Pavliga noted that about 400,000 households in the state are facing a severe cost burden because of the shortage of affordable housing as they are spending more than half their income on rent.
Rep. Pavliga introduced similar legislation in the last General Assembly, but it failed to pass. This time, however, the bill has been tagged as a priority.
What Is This New Credit?
Pavliga notes that the affordable housing tax credit in Ohio would be a performance based credit. The state would have the authority to void the credit if developers fail to meet the requirements. No credit would be paid out until the completion of the project, Pavliga said.
According to Pavliga, the affordable housing tax credit in Ohio would help in creating 34,000 new construction jobs and stimulate 2,300 more affordable housing units annually. Further, Pavliga said the credit would create about 13,000 more affordable housing units over six years.
Separately, earlier this year, Ohio Gov. Mike DeWine signed House Bill 45 into law. Under the new law, developers won’t be able to use the Federal Low Income Housing Tax Credit (LIHTC) and the Ohio Historic Preservation Tax Credit together.
Low-Income Housing Tax Credits (LIHTCs) is an efficient way to encourage affordable housing developments. It is a federal tax incentive program to boost the supply of affordable rental housing.
The program offers a dollar-for-dollar reduction in federal taxes to encourage private investment in affordable housing. The credit, in turn, allows developers to take out fewer loans, thereby reducing the interest burden. This, in turn, enables developers to charge less rent.