JEFFERSON CITY — State Auditor Susan Montee asserted today that Missouri's tax credits for low-income housing have grown too costly while providing too great of a benefit to developers and investors.
Montee's audit suggests the state should consider scrapping its method of providing aid for low-income housing projects, which she said results in just 35 cents of each $1 in tax credits actually going to build homes.
The rest is divided among investors and syndicators that purchase the tax credits, she said.
"The model that we're using is incredibly inefficient," Montee said at a Capitol news conference.
Missouri is one of 16 states that offers some sort of matching aid to a federal tax credit program for the construction of low-income houses and apartments. Missouri's tax credit has gradually expanded from 20 percent of the federal tax credit when the program began in 1990 to a full 100 percent tax credit match under a 1997 change in state law.
Based on financial estimates at the time, that 1997 change was projected to result in the issuance of an additional $107 million in tax credits over 10 years, Montee said. Instead, she said, the change resulted in an additional $537 million in tax credits.
Based on the tax credits already awarded, and those likely to be handed out in future years, Missouri could have a liability of $2.3 billion in outstanding low-income housing tax credits by 2020, the audit says.
"Certainly, it's too big," Montee said. "It's too much money being spent by the state without adequate controls over it and without planning and without the correct model."
Montee suggested the state should consider alternative ways of providing the housing aid.
She said Minnesota gets the most out of its money by providing dollars directly to nonprofit agencies for the development of low-income housing.
North Carolina makes its low-income housing tax credits refundable, whereas Missouri's must be claimed against a tax liability. The difference, Montee said, is that North Carolina's program acts more like a cash grant and more efficiently gets money to housing projects.
She also described the Massachusetts tax credit program as more efficient, because its structure allows the tax credits to be sold at 75-cents-to-80-cents of their $1 value, instead of Missouri's 35 cent value.
In a written response included in the audit, the Missouri Housing Development Commission acknowledged that the low-income housing tax credit program "does not operate at an optimum level of efficiency" and agreed that improvements are possible.
The commission's response said it is studying ways to improve the amount of the tax credits that actually gets invested into the housing projects.
Commission staff did not return repeated phone calls today seeking further comment about the audit.
Montee's audit said Missouri ranks second among states in its per capita funding for its low-income housing tax credit. Missouri's per capita rate of more than $20 compares with a rate of less than $4 for most of the other states, she said.