When Mulberry at Park Apartments, an affordable housing development in downtown Baltimore, opened its waiting list, Sherria Lovelace was among the first in line.
Looking to downsize from her too-big North Baltimore house to an apartment, Lovelace, 35, was having a hard time finding anything within her $1,000 a month budget.
"For a two-bedroom that's virtually impossible," she said, "unless you want to live in a block of vacants."
Developers, housing advocates and renters are concerned about the future of projects such as Mulberry at Park, which are largely funded by a federal tax credit program at risk if Republicans succeed in reducing the corporate tax rate.
The Low Income Housing Tax Credit, the federal government's primary vehicle for encouraging private investment in affordable housing, is supported by banks and investors who buy the credits from developers to offset their tax burden. President Trump has proposed reducing the corporate tax rate from 35 percent to 15 percent, while Republicans have floated more modest cuts.
Such a reduction could reduce demand for the tax credits and diminish the program's impact, said Jennifer Schwartz, assistant director for tax policy and advocacy at the National Council of State Housing Agencies. The value of the credits already fell on speculation that tax reform is around the corner.
"If they were to significantly lower the corporate tax rate and not make other changes to the program, we'd be producing a lot less housing and especially a lot less housing for the most vulnerable," Schwartz said.
With Republicans poised to release more details about tax reform in the coming weeks, affordable housing advocates, including Schwartz's group, are pushing for legislation that could strengthen the low income tax credit program.
The issue is important in Baltimore, where affordable housing developments have helped reduce the inventory of vacants and improve the rental housing stock without displacing residents from up-and-coming neighborhoods.
"The way affordable housing gets produced in this country today is through the Low Income Housing Tax Credit — that's the majority of the money that is used to create affordable housing," said Chickie Grayson, president and CEO of Enterprise Homes, a Baltimore-based affordable-housing developer. "To the extent that that financing is diminished because of other federal regulations or because of tax reform, then that could ultimately impact in a negative way the amount of affordable housing that will get built or preserved."
For a typical apartment project, a mortgage accounts for about 80 percent of the cost and rents allow the developer to pay off the debt and make a profit.
But to keep rents low, affordable housing developments can't take on as much debt. They must cobble together additional equity to make the project financially feasible.
Equity raised through the tax credits usually accounts for about two-thirds of an affordable development's cost. Developers also apply for add-on grants from other federal, state and local programs.
"It's about making the rents affordable," Grayson said. "The way you do that is by having a lower must-pay debt."
States are allotted the tax credits based on population and award them to development projects, which in turn sell the credits to banks and investors.
In March, Maryland's Department of Housing and Community Development awarded $20 million low income tax credits to 20 projects expected to create 1,500 new apartments across the state. The agency received 41 applications.
Mulberry at Park, developed by Enterprise Homes, opened last November. The 68-unit building is reserved for people who earn less than 60 percent of the area median income. Tenants pay 30 percent of their income as rent.
That means Lovelace and her 17-year-old son can live in a two-bedroom apartment downtown for $773 a month.
"I never thought I'd be the type of person who lives downtown," said Lovelace, who works as an administrative assistant and event planner, "But it all worked out and I love it."
Demand for affordable units already outpaces supply, and a slowing of new affordable housing development could squeeze out people who can't afford rising rents, said Odette Ramos, the executive director of the Community Development Network of Maryland, which advocates for housing policy and other neighborhood issues.
"Some will be homeless, or they will move to other jurisdictions," Ramos said, "or they will stack three or four families in a house."
Schwartz said she hopes it won't come to that.
The tax credit program, created in 1986, is supported by both Democrats and Republicans, in part because of its success rate, she said. Developments funded through the program have a cumulative foreclosure rate of less than 1 percent.
A bill sponsored by Sen. Maria Cantwell, a Democrat from Washington, and Sen. Orrin Hatch, a Republican from Utah, would expand and strengthen the tax credit program. The measure could offset the negative impact a corporate tax rate reduction and boost investor confidence in the program's stability, she said..
The strain on federal incentive programs is forcing local leaders and developers to think about alternatives for developing affordable housing.
"Even under Obama, a leader who was inclined to be supportive of urban areas, there wasn't a huge influx of dollars," said Kirby Fowler, president of the Downtown Partnership of Baltimore. "I'm fearful and think perhaps cities and states and private developers will have to continue to take things into their own hands to ensure affordability."
Ernst Valery, a Baltimore-based developer, has a unique idea for lowering rent prices without low income tax credits.
His firm, SAA | EVI Development, plans to build a 50-unit apartment building geared toward artists on a vacant warehouse site near Green Mount Cemetery. The company wants to reduce rent at half the units through a barter system. Artists could get a break on their rent by lending their artistic services, such as painting, to the building, he said.
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"Development has to change. There has to be a different option," Valery said. "We have to start seeing opportunity in our crumbling neighborhoods."
Ramos said she would like to see the local lawmakers strengthen city policies requiring developers include a certain number of affordable units in any new building.
Lovelace said she hopes lawmakers find a way to keep the affordable units coming.
Without affordable housing projects, she fears neighborhood revitalization projects will turn into gentrification projects, where every new apartment and townhouse is too expensive for residents.
"I think it's important to maintain the culture of the city," Lovelace said, "to make sure residents still feel part of it."