MaineHousing remains cautiously optimistic that a federal tax code modification bill likely being voted by Congress this week will maintain essential financial tools for addressing the growing problem of unaffordable housing in Maine.
Over the last couple of months, we’ve watched as the House eliminated the tax-exempt status of private activity bonds, while the Senate supported the continuation of this highly regarded financial program.
At MaineHousing, we’ve been greatly concerned about our future role in the financing of affordable housing projects and our ability to provide homes for low- to moderate-income households if the bonds program was eliminated.
At the end of last week, a congressional reconciliation committee recognized the value of private activity bonds and kept the program as is. We hope it stays this way when it’s time for the final votes.
Maintaining the current investments of private activity bonds will positively impact Maine’s economy. Nearly 2,000 affordable housing units will be developed in the next decade, affording Maine good-paying jobs.
In 2015-16, affordable housing construction accounted for 17 percent of construction-related jobs because of a $180 million investment from MaineHousing financing sources. That’s 2,444 jobs with $74 million in wages, according to an economic impact study by the University of Southern Maine.
The bonds, too, support below-market rate mortgages for first-time homebuyers. This year, 1,106 Mainers purchased their first house with the support of MaineHousing’s First Home Loan program, joining almost 2,800 new homeowners since 2013.
The private activity bond program, created in 1968 and modified in 1986, is one that has rarely been touched by Congress because it has been effective in financing affordable housing.
Here’s how it works. Investors purchase bonds that earn interest not subject to federal taxes. They receive a lower interest rate on the bond, and that lower rate is passed on as a low-rate home mortgage or development loan.
The bonds, together with the federal Low Income Housing Tax Credit program, finance approximately 300 affordable apartments each year in Maine. More than 1,075 units were constructed or rehabilitated between 2013 and 2016 through a combined $147.5 million investment of private activity bonds and housing tax credits.
While we’re adding rentals, thousands of seniors and lower-income wage earners still have their names on waiting lists. They earn 50 percent to 60 percent of an area’s median income, which is $22,400 and $26,880, respectively, for a two-bedroom household in Penobscot County, according to federal guidelines.
It’s through these crucial programs that Maine gains private-sector investment that serves an important public purpose — providing affordable housing that’s desperately needed in most of the state.
In 2016, nearly 58 percent of renter households statewide could not afford the median two-bedroom rent of $872 (plus utilities), and almost 53 percent of households could not afford the median home price of $184,000, according to MaineHousing’s Affordability Index.
Hancock County is unaffordable in comparison to the other counties in eastern and northern Maine. In 2016, the median home price in Hancock County was $189,000 and the median income was $48,274. Nearly 53 percent percent of households could not afford a median home price.
For renters, all Maine counties except Knox and Lincoln were unaffordable in 2016.
Since 2013, the bonds and tax credits have financed the construction or rehabilitation of 159 apartments for seniors and families in Belfast, Brewer, Dover-Foxcroft, Fort Fairfield, Newport and Old Town. They include Sebasticook River Apartments in Newport, where 24 new units were made for seniors, and Lincoln Green in Portland, where 30 units were renovated for families.
Our agency, in collaboration with affordable housing developers and lenders throughout Maine, does our best to keep costs down while meeting the needs of families, seniors and veterans. Our waiting lists for affordable housing remain long. Congress should not make it more difficult for us to finance affordable housing development and move Mainers off those rolls and into homes.
John Gallagher is the director of MaineHousing.
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