GO Zone program may not be extended by Congress
Published: October 4,2010
GULF COAST — A program that encourages private investors to build and renovate lower-income housing in areas hit by hurricanes may not be extended by Congress, leaving uncertainty over 3,200 units planned along the Gulf Coast.
Since the program was approved in late 2005 after hurricanes Katrina and Rita destroyed and damaged thousands of homes, about 20,000 housing units for lower- and mixed-income residents have been financed and built in Louisiana, Mississippi and Alabama.
The program, part of the Gulf Opportunity Zone Act passed after the storms, uses federal tax credits that housing developers sell to reduce their overall costs. Housing officials say that although the program has made a major dent in the post-storm housing problem, building the remaining planned units will be difficult, if not impossible, unless the law is renewed.
“Many of these projects will not happen. Period,” said Annie Clark, policy director for the Louisiana Housing Finance Agency.
The basic program is not new, having been authorized by Congress in 1986 as the United States looked to get away from the government-built, government-subsidized housing projects that had become synonymous with substandard housing for the poor.
The federal government issues tax credits to all the states with the requirement that housing remain affordable for the lower income for at least 30 years. The states set the type of housing and location. Qualified developers receive the tax credits and sell them to investors wishing to lower their overall federal income tax. That capital, for the developer, is supposed to limit the money borrowed for construction, reducing the developer’s debt and the ensuing rent levels.
The law requires that properties — which typically range from apartment complexes to four-bedroom homes — be rented to families with an income of no more than 60 percent of the area’s median income. Rent payments are limited to 30 percent of a tenant’s income.
For buyers, tax credits are taken off the amount of income tax owed, unlike deductions that only reduce the amount of taxable income.
As part of hurricane-recovery legislation, Congress provided extra credits to Louisiana, Mississippi and Alabama. Louisiana has issued about $170.4 million in extra credits since 2006; Mississippi, $106.2 million; and Alabama, $47.1 million. Under the usual program, states received a maximum of $2.30 for each resident annually in 2009. For hurricane-affected areas, that was boosted to $18 per capita per year.
According to state officials, Louisiana has built 8,743 units and has 2,487 under construction in coastal areas. Another 2,080 are planned but likely won’t be built if the program expires. Mississippi has completed 7,578 units and has 615 under construction. That state considers plans for 933 at risk. Alabama, which has built 4,178 units, has 184 at risk.
Under the current law, all eligible units must be built and ready for residents by Dec. 31 to get the credits.
The program’s renewal is not expected to be debated until the lame-duck session of Congress after the November elections when lawmakers are expected to take up the rancorous debate over Bush-era income tax cuts.
Michelle Whetten, vice president of the nonprofit Enterprise Community Partners Inc., said the Go Zone program has dealt with problems from both the storms and the recent recession. And the market for tax credits dropped off because many businesses lost money and didn’t need them.
Now, as the economy recovers enough to create a demand for tax credits, the program is threatened with extinction. Officials are pushing for a one-year extension that would not result in the issuance of additional credits, Whetten said. But the extra year would allow for completion of projects already on the books, she said.
Scott Spivey, vice president of the Mississippi Home Corp., said the program has jump-started post-storm homebuilding on the coast. Previously, the state only received $5 million to $7 million in tax credits annually for lower-income housing development, he said.
“Because it targets low-income families, it’s been able to help some of the Mississippians who had the most need,” Spivey said.
Clark said the program also has been a huge boost for the New Orleans area, which had lower-income housing woes long before Katrina devastated the city, and has increased construction employment that has taken a major hit during the economic downturn.
“These units not only house a lot of families, they also create a lot of jobs,” she said. “Both of those are still in need in southern Louisiana.”
Because of the program, Rosalie Brown has been back in her New Orleans retirement community, St. John Berchmans Manor, for about a year. The complex was heavily damaged by Katrina, sending the 84-year-old retiree on a three-year trek to Nashville, Tenn., and a leased New Orleans apartment with her daughter. She now has a fully equipped one-bedroom apartment that is part of the renovated complex. Previously, she lived there for five years.
“I’m very satisfied,” Brown said. “After I retired, I wanted to come to a smaller place and not have to live with my daughter … It’s very nice to be living independent and not have to depend upon your children and be able to do what you want.”
To sign up for Mississippi Business Daily Updates, click here.
Twang & Tourism: The Country Music Trail
FOLLOW THE MBJ ON TWITTERMy Tweets
Top Posts & Pages
- Deal for Jackson-Orlando flights in works with Allegiant
- Baseball stadium for Farish Street? It’s possible
- State GOP chairman calls on McDaniel to hurry with challenge
- Explosion at Coast fish plant leaves one dead, three injured
- McCarthy hired as CFO of Mississippi Development Authority
- Former Gov. Musgrove pushing lawsuit to school districts
- Guns OK inside Mississippi polling places, attorney general says
- Former state lawmaker Green dies at home at age 62
- 'Get on Up' movie premiers in Madison with Chadwick Boseman and Tate Taylor walking the red carpet
- White House hotel making comeback in Biloxi