Housing Cost
Elias Tsapelas

Last week, the Missouri Senate gave preliminary approval to a plan that supposedly “reforms” the state’s low-income housing tax credit (LIHTC) program. This proposal follows the announcement by Governor Parson last September that the Missouri Housing Development Commission, the body in charge of awarding LIHTCs, would not be issuing any new tax credits until the program is reformed by the legislature. At the time of the Governor’s announcement, my colleagues cheered the prospect of long-anticipated tax credit reform. Sadly, the most recent moves by the Senate deserve no cheers and should hardly be considered “reform.”

Prior to 2017, Missouri’s LIHTC program was one of the most generous in the country. The LIHTC program is federally created and funded, but in an effort to increase affordable housing development across the state, Missouri agreed to match up to 100% of the federal funds allocated to the state. The problem was that report after report showed the tax credit wasn’t an effective use of state funds. For example, a state auditor’s report showed that only 42 cents of each dollar allocated to LIHTCs was spent on the development of low-income housing. That was why the state’s portion of the program was halted in 2017.

But those who profit from the tax credits have always had a well-organized lobby, so it was only a matter of time until legislative efforts were made to restore Missouri’s funding. The measure approved last week returns Missouri’s funding for LIHTCs to 72.5% of the federally allocated funds.  Unsurprisingly, a St. Louis Post Dispatch article chronicling the negotiations notes the original “reform” proposal was to only return 50% of the funds, but developers felt that number was too low and as such eventually got the amount increased 77%, before eventually reaching the compromise number of 72.5%.

Just to summarize this backwards process: a program that currently receives zero state dollars was offered a return of 50% of their funding (over $100 million annually), supporters of that program claimed 50% was an inadequate number, and then the funding increase was bumped up north of 70% while no structural changes were made to the program that would actually ensure more dollars are spent on the original purpose of the tax credit (low income housing). If any dollars are going to be restored for the LIHTC program, there needs to be serious structural reform first. Anything else is just window dressing.


About the Author

Elias - Web
Elias Tsapelas
Senior Analyst

Elias Tsapelas earned his Master of Arts in Economics from the University of Missouri in 2016. His research interests include economic development, health policy, and budget-related issues.