The Role of Tax Credits in Affordable Housing

Build Illinois Homes Tax Credit Act 

A lack of affordable housing has been plaguing the state of Illinois, with a shortage of hundreds of thousands of affordable housing units. The Build Illinois Homes Tax Credit Act aims to improve this situation.  

This legislation would create a tax credit scheme that would make owners of qualified low-income housing developments eligible for credits to offset taxes and payments levied by the Illinois Income Tax Act and the Illinois Insurance Code. It is modeled on the federal tax credit program and is contained in House Bill 4909 and Senate Bill 3233, which are currently making their way through the legislature. A similar measure stalled in the House last year. 

Housing Crisis 

There is currently a shortage of around 300,000 affordable rental units in the State of Illinois, according to a recent report published by Housing Action Illinois, an affordable housing advocacy group. Last year, a report by the Illinois Housing Council showed that the state has lost 13 percent of its affordable rental units since 2011.  

Allison Clements, the executive director of the Illinois Housing Council, a housing association representing nearly 300 businesses and nonprofits, has teamed up with Representative Dagmara Avelar of Bolingbrook, the House Bill’s main sponsor, to advocate for this issue.  

Avelar has stated that the program would create up to 1,150 affordable homes and apartments within six years. She says her constituents have expressed their concerns about being unable to afford proper housing.  

In Chicago, in particular, the affordable housing crisis is made worse by the fact that not enough units are being built to meet demand. Zoning and land-use regulations have hindered development.  

Corporate Ownership 

The rate of corporate ownership in the housing market has increased exponentially, driving up prices and forcing people out. Corporate landlords buy up cheaper properties, sometimes doing minor updates, sometimes overhauling the entire thing, and sometimes making no changes at all, only to offer them at a significantly increased price. Investors sometimes buy a multi-unit building and recreate it into a single-family unit, flipping it for profit. This is an added reason why the affordable housing shortage has reached such an untenable point. 

Tax Credits for Affordable Housing 

The United States Department of Housing and Urban Development runs a program called the Low-Income Housing Tax Credit. It gives billions of dollars per year in budget authority to state and local low-income housing agencies to be able to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing meant for low-income households.  

Similarly, the Build Illinois Homes Tax Credit Act would provide a tax credit incentive for landlords and developers to acquire or build qualified low-income housing. The idea is to keep units eligible for affordable housing rather than flipping them and reselling them at a profit or increasing rents out of the affordable range.  

Conclusion 

As rents continue to rise, available units dwindle, and inflation squeezes pocketbooks, Illinois residents face an increasingly challenging situation. Financial incentives have a proven track record on a federal level, so it is reasonable to expect that if House Bill 4909 and Senate Bill 3233 pass, some relief may be on the horizon.