Congress Vows to Do the Right Thing -- Next Year


Early in the summer, Congress nearly gutted the 1977 CommunityReinvestment Act, the best tool ever to get banks to grant loans in working-class and poor neighborhoods.

Now the Senate and House are meddling with the low-income housing tax credit, arguably the most successful and cost-efficient program ever devised to draw investment into affordable housing.

The credit offers investors -- primarily big corporations -- a tax write-off for expenses they incur in acquiring, rehabilitating or constructing low-income housing. Since 1987 it has generated over 300,000 apartments for poor renters. But this December 31, like every New Year's Eve, the credit faces death unless Congress moves to extend it. Obsessed with its macro-budget problems, Congress hasn't felt free to make the tax credit permanent.

The problem is: This is not just another piece of pork. The tax credit has become the only show in town for poor people's housing. Almost every other federal low-income housing program has ground to a standstill. Most private builders have deserted the field, too.

Tax-credit advocates claim it has been responsible, since the late '80s, for 94 percent of new housing units renting under $450 a month. The cost to the federal Treasury is $300 million a year -- a fraction of what Congress would have to appropriate to build the units directly.

So why would Congress risk slaughtering this golden calf? Tax-credit supporters range from the United Way to the American Association of Retired Persons, Jack Kemp and George Bush. "For the record," 80 percent of the Senate and 60 percent of the House say they favor extension, too.

But congressional tax-writing committees fear that if any tax legislation is allowed onto the floor, it will open a flood of proposals to preserve less meritorious tax breaks or maybe even add new ones. Leaders such as House Ways and Means Chairman Dan Rostenkowski, D-Ill., are passing the word: Don't worry. We'll renew the tax credit next year. We'll even make its benefits retroactive for deals made early in 1992.

That's not enough for local leaders such as Kansas City (Mo.) Mayor Emanuel Cleaver. Investors will be scared off, he says. The "jaws of uncertainty" have opened "just when they thought it was safe to go back into the central city to construct decent, low-income housing." Major corporations, he warns, will fear that they can be "hung out" or "strung out there" if they get in bed with the federal government.

So far, there's no sign Congress hears these pleas. You have to hTC shudder when you learn it is about to vote on restructuring America's entire banking system.

That bill, to permit almost unlimited interstate banking and give a green light to "megabanks" operating across multiple state lines, has attracted swarms of special-interest lobbyists to Capitol Hill.

Lost in the debate is the impact of bank restructuring on America's communities. Will business or home loans be tougher to get when and if BankAmerica and Security Pacific, NCNB of Charlotte and C&SSovran; Corp. of Norfolk, and New York's Chemical Banking and Manufacturers Hanover Trust, merge into America's second, third and fourth largest banks respectively?

A swell of consumer, civil-rights and neighborhood advocates say yes -- that the megabanks will not only fund massive development deals that leave communities credit-starved, but will acquire such huge market shares they can raise their interest rates with impunity.

To head off such criticism, NCNB and Sovran, planning to merge as "NationsBank," have pledged a stunning $1 billion a year, or $10 billion over the next decade, for loans in economically disadvantaged communities.

The president of NCNB's community-development corporation, Dennis Rash, tells skeptics: "We intend to become the nation's leading community-development banker." He says the two chairmen, C&SSovran;'s Bennett Brown and NCNB's Hugh McColl, both have roots as small-town bankers in the Carolinas and intend to delegate substantial lending power to the managers of their combined 1,900 branches spread from Baltimore to El Paso. "We won't just be a megabank doing wholesale banking."

Maybe significant long-term commitments, parallel to NationsBank's $10 billion promise, can to be extracted from the other merging megabanks -- with clear reporting and accountability standards.

But a sinking feeling in the pit of your stomach is that a Congress dithering around in its own fiscal irresponsibility -- and unwilling to commit to a clear winner like the low-income housing tax credit -- will botch the job.

Neal R. Peirce writes on state and urban affairs.

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