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Low-income housing tax credit freeze casts shadow over legislative session

RISE Community Development's Stephen Acree stands in one of his organization's apartments in Forest Park Southeast. His group used low-income housing and historic tax credits to redevelop a slew of buildings in the central corridor neighborhood.
File photo I Jason Rosenbaum I St. Louis Public Radio
RISE Community Development's Stephen Acree stands in one of his organization's apartments in Forest Park Southeast. His group used low-income housing and historic tax credits to redevelop a slew of buildings in the central corridor neighborhood.

A question and answer panel with four Republican statewide officials was meant to showcase the party’s unprecedented consolidation of power within Missouri’s government. Instead, the Lincoln Days event pointed to a major policy division among the GOP.

That’s because Gov. Eric Greitens touted how he engineered a halt to state low-income housing tax credits in late December. He called the incentive a “scam” that had been “ripping off” Missourians for years, and received a round of applause from the audience when mentioning how he “zeroed out” the program.

Greitens uttered those words seated beside two GOP statewide officials that voted against the tax credit embargo: state Treasurer Eric Schmitt and Lt. Gov. Mike Parson. Parson in particular has pushed back against Greitens’ contention that the tax credit is inefficient and wasteful, instead contending that it’s a crucial tool to deliver high-quality places to live for the poor and elderly.

This disagreement is playing a major role in the General Assembly’s legislative session, especially since Greitens holds all the leverage to keep the tax credit freeze in place unless lawmakers make changes to the program. And the division between Greitens and Parson on the issue is likely why people that follow the tax credit’s trajectory were closely watching whether the governor would step down after admitting to an extramarital affair before he took office.

But those who’ve used the tax credit are hoping for an end to the impasse, adding that they’re willing to alter a program they feel can help the state’s most vulnerable residents.

From our vantage point, there needs to be more affordable housing, said Chris Krehmeyer, the CEO and president of Beyond Housing. “Too many people don’t have that decent and safe place to live. Neighborhoods need more development. Tax bases need a boost. Affordable housing achieves all of that.”

A long, long fight

Before delving more into the political conflict, here’s how the low-income housing tax credit works: It starts with a for-profit or non-profit company coming up with a housing proposal for the working poor, elderly or disabled. The project is presented to the Missouri Housing Development Commission (MHDC), which has the final say over approving both state and federal low-income housing tax credits. 

Jason Crowell
Credit File photo I Jason Rosenbaum | St. Louis Public Radio
Former Sen. Jason Crowell voted with Gov. Eric Greitens to halt state low-income housing tax credits last year.

If MHDC approves a project, the credits are eventually issued in 10 equal increments over a 10-year period. Typically, the tax credits are sold to banks or syndication firms, with the proceeds from that sale going toward bringing down development costs. That, in turn, allows a housing facility to charge lower rents.

Few argue that the tax credit hasn’t produced high-quality housing. For instance: Covenant Place used the program to finance a senior living facility in St. Louis County that opened in 2016.

“Many of our residents are the people that support others,” said Covenant Place executive director Joan Denison in 2016. “They’re the school teachers, the health care workers, the shop workers and so forth. And it’s difficult for people to amass retirement funds, particularly when they’re living so long into their 90s and 100s right now.”

But program critics, including former state Sen. Jason Crowell, contend the tax credit wastes the state money — and provides a lucrative benefit to bankers, syndicators and developers.

“As a private citizen taxpayer, they’re spending my money they would never, ever, ever spend their own money,” Crowell said. “And they’re doing that as politicians that don’t give a rip about people that employ people back home and pay taxes back home. It fires me up. That’s why I’m glad to have a kindred spirit in Gov. Greitens. And I think as long as he’s governor of the state of Missouri, that philosophy's not going to change hopefully.”

Greitens appointed Crowell to the MHDC last year. He joined with Greitens, Attorney General Josh Hawley and other commission members appointed last December in voting to stop issuing the state version of the low-income housing tax credit.

“If the General Assembly does not pass reforms, then the decisions that were made in December are going to carry through,” Crowell said.

Legislative gridlock

Whether lawmakers can actually make change to Greitens’ liking is an open question. Efforts to scale back or restructure the low-income housing tax credit program faltered for years — even when there was a special session around the issue in 2011. 

State Sen. Jamilah Nasheed holds up a petition at a rally at Urban Chestnut Brewing Company on Monday. Raise Up Missouri is gathering signatures to put a statewide $12 an hour initiative on the ballot. Aug. 28, 2017
Credit File photo I Carolina Hidalgo | St. Louis Public Radio
Sen. Jamilah Nasheed, D-St. Louis, has been critical of Greitens for halting low-income housing tax credits.

In fact, some lawmakers in the Senate expressed their displeasure over the tax credit embargo by refusing to let three of the governor’s MHDC appointees withdraw their nominations.

“What we wanted to be able to do is show the governor that he cannot continue to circumvent the legislative process,” said Sen. Jamilah Nasheed, D-St. Louis. “Advise and consent is what we’re supposed to do. And the governor apparently doesn’t understand the process.”

But in reality, the Senate’s move didn’t have much practical impact, since the MHDC likely doesn’t have a quorum now to do anything. As long as Greitens remains in office, he can prevent the low-income housing tax credit from being issued for years — a decision worth hundreds of millions of dollars.

Sen. Dan Hegeman is handling legislation that would lower the cap for the low-income housing tax credit to $100 million a year. The Cosby Republican is hoping the tax credit embargo brings his colleagues to the table.

“I hope that we can find some room for discussion and negotiation and compromise to find the place where we can move forward on this program,” Hegeman said. “Because I believe they are needed in the state. At what level do we fund those programs?  That’s an issue of debate and I’m happy to lead that part of the discussion as well.”

House Minority Leader Gail McCann Beatty says the impasse will end up hurting her constituents in Kansas City that need affordable places to live.

“And I’m not saying that the tax credit program is perfect and doesn’t need some changes,” McCann Beatty said. “But it’s absolutely needed until we have something else in place.”

St. Louis Public Radio’s Jo Mannies, Marshall Griffin and Erin Achenbach contributed information for this story.

Follow Jason on Twitter: @jrosenbaum

Jason is the politics correspondent for St. Louis Public Radio.