In a year when South Carolina has so much money it’s giving at least $1 billion back to taxpayers, we’re both perplexed and concerned by plans to put a low limit on tax relief aimed at solving one of the state’s most serious challenges. : a lack of affordable housing, especially in the most job-creating areas.
We understand the thinking of lawmakers behind S.1120, which would set an annual cap on the state’s affordable housing tax credit program, cutting the incentives to about half of what lawmakers approved late last year. The bill would limit these credits to $15 million per year. Essentially, lawmakers fear that the popularity of the program will eat away too much at state tax revenues in years to come.
But we’re concerned that if the bill passes as is, lawmakers will fix that problem while largely ignoring another equally, if not more important, issue: the state’s growing need for creative solutions to develop places to live. more affordable. The cap should be raised to at least $25 million and possibly restructured more creatively to ensure rural and urban projects are aided by the pause.
Since the SC Workforce and Senior Affordable Housing Act took effect two years ago, its incentives have helped develop nearly 9,600 units statewide, according to Post and Courier reporter Nick Reynolds. In some cases, these new state tax credits have made possible projects that otherwise would not have been financially feasible.
Lawmakers need to pass something, as the state Fiscal Responsibility Authority essentially froze the current program due to concerns about its growing impact on the state budget. This decision has created uncertainty among those working to develop new affordable housing projects. No less than 30 of them are now in the air.
Tracy Doran, president and co-founder of the Humanities Foundation at Mount Pleasant, was among those who urged lawmakers on Wednesday to raise the proposed cap. “Housing affordability is a crisis in our rural communities as well as rapidly growing urban centers,” she told members of a Senate subcommittee. “The state tax credit created the funding needed to fill the funding gap.” It has helped both larger projects that use tax exempt bonds as well as the 9% tax credit scheme run by SC Housing which is more useful in rural areas. Splitting a $25 million pot of credits with $5 million for these projects pulling the 9% and the rest going to tax-exempt bond developments would be one way to help both.
If these targeted tax credits cost the state dearly, inaction would cost it even more. A 2019 study found that one in three families in South Carolina struggle to find housing, and those trying to attract new businesses to the state say one of their biggest obstacles is the realization that employees of these new companies will have a hard time finding a place. live near their new job. Columbia Mayor Daniel Rickenmann told lawmakers his city needs 700 affordable housing units this year alone. The reality of Charleston is similar.
We understand lawmakers’ concern about the future impact on state revenue that the new affordable housing tax credit could have if it weren’t capped, but they also need to consider the future impact on the economy of the state as a whole. Not only is there the short-term benefit of construction wages, materials, and increased tax bases, but there is also a very real impact on the future economic growth of the state.
Lawmakers should cap the tax credit to protect future state budgets, but they should do so in a way that maintains a strong state tax credit program that continues to help more affordable projects. to start.