Washington Park is not an isolated example. Neighborhoods from the South Bronx to Houston to Oakland, Calif., to Woonsocket, R.I., are experiencing a similar rebirth.
How so? With two federal tax credits: one that currently supports 90 percent of affordable housing development nationwide, and another that is spurring investments in businesses, real estate projects and facilities like health clinics, charter schools and child care centers, all in low-income communities.
But these credits may be in peril. Congress is working on an overhaul of the tax code that seeks to eliminate deductions and credits, including these tried-and-true programs. Two weeks ago, the Democratic and Republican leaders of the Senate Finance Committee asked all senators to identify by July 26 which tax breaks, deductions and credits should be retained.
While the arguments for comprehensive tax reform are well known, eliminating these credits would be tragic. They bring much-needed capital to communities most investors would never consider.
Passed by Congress in 1986 and signed into law by President Ronald Reagan, the low-income housing tax credit gives the private sector an incentive to create and invest in affordable housing. It is widely viewed as one of the most effective federal housing programs ever.
The new-markets tax credit, created in 2000, was born of the same principles that gave rise to the housing credit: first, that the private sector needs incentives to invest in worthy projects that would otherwise be considered too risky; and second, that those incentives lead to greater accountability and superior project performance when compared with federal grant programs.
As of 2011, the new-markets credits had financed 3,500 businesses and real estate projects in low-income neighborhoods, developed or rehabilitated more than 109 million square feet of commercial real estate and community facilities, and helped to create or preserve more than 360,000 jobs.
Last year alone, the housing and new-markets credits together attracted some $14 billion in direct investment in capital-starved communities, supporting an estimated 160,000 jobs.
These credits serve populations that are the hardest to reach and are the most distressed. More than 80 percent of housing credit units go to families making less than half of the median income in their area. And nearly three-quarters of new-markets investments go to areas that the Treasury Department considers to be in severe need.
Moreover, the Government Accountability Office in 2007 estimated that 88 percent of those who used the credit would not have made the investment without it.
