Glenn Grothman U.S. House of Representatives from Wisconsin's 6th district | Official U.S. House Headshot
Glenn Grothman U.S. House of Representatives from Wisconsin's 6th district | Official U.S. House Headshot
Congressman Glenn Grothman of Wisconsin, along with Congressman Paul Gosar from Arizona, has introduced a bill aimed at repealing the Low-Income Housing Tax Credit (LIHTC). The proposed legislation, known as the Low-Income Housing Tax Credit Elimination Act, seeks to terminate what Grothman describes as an "outdated, costly, and ineffective program" that primarily benefits developers and banks rather than reducing housing costs for low-income Americans.
The LIHTC currently provides tax credits to developers to subsidize the construction and rehabilitation of affordable housing units. These subsidies cover approximately 70% of a project's cost. However, critics argue that the program has become a financial boon for developers and banks instead of aiding tenants. According to Grothman, ending the LIHTC could save taxpayers $69.1 billion over ten years.
Grothman stated, “The Low-Income Housing Tax Credit is another way for developers to get rich while hardworking taxpayers foot the bill.” He criticized the federal government for covering significant portions of construction costs through these subsidies. Grothman emphasized focusing on reducing supply constraints that hinder affordable housing development.
Gosar echoed these sentiments by pointing out that government subsidies intended to alleviate tenant burdens are often misused. He said, “Instead of creating affordable housing for those who need it most, the program produces costly low-income housing and lines the pockets of greedy developers and banks.”
Adam Michel from the Cato Institute labeled LIHTC as "a textbook case of good intentions gone wrong," arguing that it benefits banks and developers more than renters after nearly four decades in operation.
Edward Pinto and Tobias Peter from AEI Housing Center highlighted several issues with LIHTC since its inception in 1986. They cited problems such as crowding out private market developments, high taxpayer costs averaging $450,000 per unit compared to zero for private projects without subsidies, complexity leading to a cartel-like ecosystem among developers and nonprofits profiting significantly while demanding more subsidies.
A 2009 study indicated that construction costs per square foot for LIHTC projects were 20% higher than average industry projects. A 2017 study further found tenants captured only about 24% of development subsidies under LIHTC due to its complex structure favoring developers and banks.
Grothman's bill aims not only at ending this program but also suggests policymakers focus on reducing supply constraints rather than directing tax dollars towards politically connected entities.
According to projections by the Congressional Budget Office (CBO), repealing LIHTC would result in substantial savings amounting up to $69.1 billion over ten years.