February 13, 2018

The Honorable Andrew M. Cuomo

Governor of New York State
New York State Capitol Building
Albany, NY 12224

The Honorable John J. Flanagan

Majority Leader, New York State Senate
New York State Capitol Building, Room 330
Albany, NY 12247

The Honorable Carl E. Heastie

Speaker, New York State Assembly
Legislative Office Building, Room 932
Albany, NY 12248

Re: Oppose Tax Credit Deferral Budget Proposal (Article VII - Revenue Bill –
Part S)

Dear Governor Cuomo, Majority Leader Flanagan, and Speaker Heastie,

We are writing to share our strong opposition to the deferral of tax credits, as proposed in
the 2018-19 Executive Budget proposal, that are vital to the development of affordable housing
in New York State. The deferral of brownfield redevelopment tax credits, remediated brownfield
tax credits, state low income housing credits (SLIHC), and credits for the rehabilitation of
historic properties would put the financing of current and planned projects in jeopardy, decrease
the value of the credits, and erode investor confidence in these credits moving forward.

New York State is in the midst of a severe housing crisis with more than 3 million
households across our state exceeding the “affordability threshold” for housing; as they pay 30
percent or more of their household income for housing costs. Of this population, more than 1.5
million households paid a staggering 50 percent or more of their income for housing. Last year,
you – the leaders of New York’s government - joined together to make a landmark commitment
of $2.5 billion in public subsidies for a five-year housing plan to create 100,000 units of housing
to address this crisis. However, this proposed deferral undermines that historic appropriation that
we all have worked so hard to achieve.

Specifically, affordable housing projects depend on public subsidies and incentives to

attract private investment to provide the necessary financing to develop housing projects. This
public-private partnership has been successful, and promised to reach new heights with the
landmark state funding appropriated last year. The proposed tax credit deferral would undermine
one of the pillars of affordable housing financing, however, as New York’s tax credits would be
devalued and would attract less private investment. In turn, the State would have to provide more
public funding for projects, developers would have to find more private investments, or the
affordable housing projects would be forced to halt. Under any of these scenarios, fewer
affordable housing units would be developed and New Yorkers would be deprived of much
needed housing – and the promise of the $2.5 billion public commitment would be severely
diminished.

The deferral of the tax credits would have an immediate and negative impact upon
projects currently in development and those being planned. For instance, one affordable housing
developer, with five projects underway in different regions of the state, estimates that this
proposal would result in a decrease in private funds of 10 percent or more (depending upon the
tax credits, the percentage could be higher). The tax credit deferral would result in a $500,000
loss in private funds for these projects, and the developer would have to secure those funds from
public housing program or private investors, or halt the projects altogether. The scramble to find
additional funding would present itself in each of the hundreds of affordable housing project
throughout New York State if this proposal were to be enacted into law, causing significant
upheaval and causing numerous projects to stall or to be abandoned.

Notably, the value of tax credits nationally were already declining due to the recent tax
liability changes pursuant to the Federal tax law. The proposed tax credit deferral would
exacerbate that devaluation even further, since investors would not be able to use New York’s
tax credits for three years, thereby making them a less attractive investment. Investors will
reasonably invest in tax credits from other states that can be used or refunded in the ensuing tax
year.

The longtime damage of this proposal, however, is the uncertainty New York State’s
proclivity for changing the rules regarding already awarded tax credits will have on affordable
housing investors. While it is true that New York previously deferred several tax credits in 2010,
that initiative was presented as a one-time measure that was necessary due to the worst financial
crisis since the Great Depression and an extremely fragile state economy. For many developers,
the impact was minimized due to fewer projects being undertaken and an appreciation for the
tenuousness of the economy. Our current situation is entirely different, with our robust economy
and the record public funding for affordable housing, housing-related tax credits have and should
attract significant investor interest. Unfortunately, for New York State to resort to a tax credit
deferral again would signal to investors that these credits are unreliable and that the rules are
always subject to change. This will, predictably, diminish investors’ willingness to invest in New
York’s tax credits or cause them to demand high risk premiums for doing so.

The proposed tax credit deferral will lead to less private investment in affordable housing
and the development of fewer affordable housing units. Accordingly, we respectfully urge you to
reject the tax credit deferral proposal during budget negotiations and in the 2018-19 enacted
State budget. Thank you for your consideration, and please contact us if you have any questions
or would like to discuss this critical issue.

Sincerely,

New York State Association for Affordable Housing

Enterprise Community Partners
Local Initiatives Support Corporation (LISC), Buffalo
Local Initiatives Support Corporation (LISC), NYC
New York Housing Conference
Supportive Housing Network of New York

Cc: Honorable Catharine Young

Honorable Helene Weinstein
Honorable Elizabeth Little
Honorable Steven Cymbrowitz