The tax debate in Congress is on, but what should legislators focus on if they want to create homes, drive revitalization, and create vibrant communities through the tax code? LOCUS, a national coalition of purpose-driven real estate developers and investors, weigh in based on their experience on the ground.
It is a daunting moment for communities: the majority of rural communities are shrinking, downtowns stagger under distressed office assets, and a housing supply crisis lingers as the federal government scales down. In our largest metropolitan areas, very few neighborhoods offer enough housing, let alone affordable or moderately priced housing, near needed amenities and economic opportunity. In the midst of this turbulence, Congress will sit down to craft comprehensive tax legislation that will shape the next several decades of development. How we finance just about everything we build is up for debate. Given the challenges, how can the tax code address America’s desperate need for housing?
Prioritizing incentives that deliver smart growth—that support a mix of building types and uses, diverse housing and transportation options, development within existing neighborhoods, and robust community engagement—is the answer. Smart growth supports the creation or preservation of vibrant places and, by encouraging infill development and density, fosters growth in areas that cost less for local governments to provide services to relative to further sprawl. Smart growth can help create the range of affordable homes the country so desperately needs in locations that can offer a high quality of life and efficient access to services.
LOCUS’ recommendation to center smart growth in the tax debate is rooted in the decades of development experience that LOCUS’ national coalition of real estate developers and investors bring to the table. Broadly, LOCUS advocates for sustainable, equitable, walkable development in America’s communities. LOCUS’ expertise isn’t abstract—the membership utilizes the federal financing programs discussed below to create homes and community assets every day.
The good news for Congress is that many tax provisions that support smart growth already exist. From Opportunity Zones to the Low Income Housing Tax Credit, many standing programs are delivering impact. In an age of lean government, protecting these highly effective, existing tools is critical. In addition, a number of new or reshaped programs, such as the credit proposed by the Neighborhood Homes Investment Act, could help deliver smart growth in more communities. The priorities listed below are tailored to current market conditions and designed to ensure this year’s tax legislation is a catalyst for smart growth:
- Incentivize the development of more housing, especially near transit, jobs, and resources.
- Support affordable housing financing by extending and strengthening the Low Income Housing Tax Credit.
- Enact the Neighborhood Homes Investment Act.
- Enact the Workforce Housing Tax Credit Act or a similar incentive.
- Support the removal of barriers to housing through programs with a budget impact.
- Promote redevelopment and reinvestment via strong development incentives in underinvested communities.
- Extend Opportunity Zones with reforms.
- Extend the New Markets Tax Credit.
- Reauthorize the Brownfields Redevelopment Deduction.
- Support downtowns, mainstreets, and high opportunity corridors in urban, rural, and suburban settings by providing financing for transit-oriented development (TOD).
- Streamline and strengthen Railroad Rehabilitation and Improvement Financing (RRIF) and TIFIA TOD financing tools.
- Embed criteria or incentives in existing programs to drive investments into smart growth locations (i.e., a potential extension of the Opportunity Zone program that would incentivize investments in OZs with high job and population density as well as robust transit access relative to the broader region).
This tax bill is a Rubicon of sorts–if the patterns of recent federal tax policy discussions hold true, anything that remains undone, or done poorly, will be the law of the land for several years. Congress has the opportunity to incentivize smart growth in communities across the country, to create homes, and spur prosperity. They must deliver.
LOCUS, a program of Smart Growth America, is the only national coalition of real estate developers and investors who advocate for sustainable, equitable, walkable development in America’s towns and metropolitan areas. LOCUS brings together real estate developers and investors from across the country to change policy at the local, state, and federal levels and to build neighborhoods that are more economically, socially, and environmentally sustainable for America’s future.