Ever hear the phrase “throwing good money after bad?” That’s what Missouri lawmakers are considering doing with the proposal to revive the state’s low-income housing tax credit (LIHTC) program. With little more than a week remaining in this year’s legislative session, and with so many policy priorities outstanding, it’s easy to wonder why time is being devoted to a program that has been shown to be a bad investment for Missouri taxpayers. Are lawmakers really trying to help low-income Missourians find affordable housing, or are they simply underwriting the interests of the state’s well-connected real estate developers?
Proponents of Missouri’s LIHTC program often cite the claim that there are an estimated 100,000 people on waiting lists for low-income housing as a rationale for reviving the program that was halted in 2017. I agree that affordable housing for low-income Missourians is important, but I disagree that the LIHTC is an effective way to address the problem. Missouri already receives over $160 million per year from the federal government for the same low-income housing projects.
The bottom line is that the program doesn’t work, and policymakers know it. Just last week, Missouri’s own state treasurer, who sits on the board responsible for issuing the low-income housing tax credits, criticized the program for being wasteful and inefficient. Missouri’s three previous state auditors have concluded that for each dollar of tax credit awarded, only a little more than $0.40 is spent on building affordable housing. The remainder goes to developers, investors, and government. It should go without saying that Missourians deserve a better investment of their tax dollars.
With so little of each state dollar going toward building more housing, it shouldn’t be surprising that the program doesn’t result in a significant increase in the amount of available affordable housing across the state. This result aligns with academic research on the federal program, which has illustrated why the structure of the LIHTC and surrounding regulations inflates building costs and results in poor returns on investment.
It is important to reiterate that the discussion in Jefferson City is only regarding whether Missouri should resume devoting funds on top of what the federal government already provides. Even without any new credits being authorized since 2017, as of last report, the state is potentially on the hook for around $1 billion in state low-income housing tax credits As lawmakers continue to struggle to balance the state’s budget each year as a result of the increasing cost of other spending priorities’ (education, Medicaid, public safety, etc.), shouldn’t all tax dollars go toward programs where they can be expected to stretch a little further?
Supporters offer a false choice when arguing that reauthorizing Missouri’s LIHTC program is the only way to address the state’s affordable housing needs. How could this be true when Missouri is one of only 15 states that even have programs matching the federal government’s LIHTC funds each year? Why don’t lawmakers look to the other 35 states to see how they address this issue?
The cost of restoring Missouri’s LIHTC program would be equivalent to $105 per month for each low-income individual currently on the waiting list. The value received by those individuals would be the equivalent to $44 per month. Deciding where to use taxpayer dollars is all about priorities; the question is whose priorities are more important: low-income Missourians in need of affordable housing or the developers who profit from that spending?