A provision in one version of the federal Republican tax plan could imperil a major affordable housing program in the Cowboy State.
Wyoming Community Development Authority Executive Director Scott Hoversland is worried that the House bill’s elimination of a special type of tax-exempt bond will mean his agency can no longer offer affordable mortgages to first-time homebuyers in the state.
The first-time homebuyer program has operated since the 1970s and issued nearly 1,000 loans over the last two years worth over $158 million.
But if the House’s version of the tax plan passes?
“We wouldn’t be able to offer that program any more,” Hoversland said.
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The housing authority offers state residents who have not owned a house in three years discounted mortgages that usually have an interest rate about one-quarter percent lower than what banks offer. The discount is funded by what are called tax-exempt private activity bonds, which municipalities and other local government agencies use to fund a variety of projects related especially to affordable housing.
Because the bonds are tax-empty, investors are willing to accept a slightly lower interest rate than is standard and the development authority uses the difference to offer more affordable mortgages to qualified homebuyers, Hoversland said.
That discount can make a big difference for Wyomingites on the verge of being able to afford a home.
“It puts those people that are trying to get into their first home into it at a cost that they probably wouldn’t be able to do through one of those market rate programs,” Hoversland said.
But as part of an effort to raise money, largely to fund major cuts to the corporate tax rate and pass tax cuts along to wealthy individuals, Republicans in Congress have sought to eliminate various little-noticed deductions in the tax code.
The Institute on Taxation and Economic Policy estimated in September that in Wyoming, 70.7 percent of the tax cuts in the GOP plan would go toward the richest 1 percent of residents, who would see their tax bill drop by $180,000.
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Hoversland was in Washington, D.C., last week in part to meet with the offices of Wyoming’s congressional delegation to discuss the bond issue. The Senate and House are currently working to sort out the differences between their two measures.
Wyoming’s U.S. Rep. Liz Cheney, who voted for the House bill eliminating the bonds, would not say whether or not she supported keeping the financial tools or not.
“Congressman Cheney has discussed tax-exempt private activity bonds and many other issues related to tax reform with constituents across Wyoming,” spokeswoman Maddy Weast said in an email.
Mike Enzi, Wyoming’s senior U.S. senator and a fellow Republican, is on the committee that will reconcile the two bills. He said he was aware of the concerns about eliminating the tax-exempt bonds, which the Senate bill did not do, but Enzi also declined to say whether or not he supported eliminating the bonds.
“He is not going to negotiate the different provisions of the tax bill through the media,” spokesman Max D’Onofrio said in an email. “That is what the conference committee is for, but he is intently listening to the different perspectives people have in Wyoming.”
Hoversland said he was especially alarmed by the wording of the House bill. Instead of saying that the bonds would be eliminated once the bill is signed into law, it states that the bonds will be eliminated on Dec. 31. The WCDA’s lawyers have said they won’t allow the agency to issue any more of those bonds in 2018 unless the provision is removed or the bill fails prior to that.
The housing authority’s board has given permission to rush two to three years worth of the bonds to market before the end of the month in order to sustain the first-time homebuyer program for at least a few more years, but its long term-future will be in jeopardy if the House’s version of the tax plan is approved, Hoversland said.