Audit Cites High Cost, Low Return of Housing Credit; Tax Program Can Be Made More Efficient, Schweich Says

By Young, Virginia | St Louis Post-Dispatch (MO), March 11, 2014 | Go to article overview

Audit Cites High Cost, Low Return of Housing Credit; Tax Program Can Be Made More Efficient, Schweich Says


Young, Virginia, St Louis Post-Dispatch (MO)


JEFFERSON CITY * An audit of Missouri's Low-Income Housing Tax Credit paints a picture of a runaway program that has cost far more than projected, tops all other states in spending and produces "a very low return on investment" for taxpayers.

Only nine other states have such credits, and their programs are much smaller, says the report released Monday by Missouri Auditor Tom Schweich.

Missouri has authorized $842 million more than projected when the Legislature passed a law in 1997 that allowed the state to match a federal credit for housing development, the audit found. Missouri's $172 million in authorizations in 2012 gave it the highest per- capita outlay in the nation at $28.60 per resident. Georgia was second at $20.89. Six of the 10 states spent less than $5.14 per capita.

"We are not questioning that the program has helped thousands of people live in a dignified way," Schweich said in an interview. "But we believe it could be done much more efficiently."

Missouri's credits are awarded to developers annually by a group of gubernatorial appointees and statewide elected officials who make up the 10-member Missouri Housing Development Commission. The developers then sell the credits to generate equity for construction.

But as this audit and a prior one by former Auditor Susan Montee noted, the credit is an extremely inefficient way to finance housing.

Only about 42 cents of every dollar Missouri spends on the program actually goes into construction. The rest of the money is lost to federal taxes, middlemen known as syndicators and a discount that stems from selling the credits up front but parceling them out over 10 years.

As a result, "the current model finances low-income housing construction at an effective interest rate of over 19 percent," the audit concludes.

A Department of Economic Development cost-benefit analysis also found that last year, the housing tax credit returned only eight cents for every state tax dollar spent and created roughly 63 new full-time jobs.

Schweich translated that finding into a cost to the state of $61,000 per unit of housing or $2.3 million per job.

And he said even that low return was overstated, because the economic development department's analysis mistakenly assumed that no low-income housing construction would take place without the state credit.

In a brief response included with the audit, the Missouri Housing Development Commission said the program should not be judged solely on a strict fiscal cost-benefit basis.

"Many non-economic tax credit programs also provide community value that cannot be easily quantified in dollar terms," the agency said.

The program's supporters have stressed the social benefits of providing affordable rental housing for the working poor, the elderly and the disabled.

Chris Krehmeyer is executive director of a nonprofit agency in North St. Louis County called Beyond Housing, which develops apartments using the tax credits. …

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