The New Markets Tax Credit Program

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The new markets tax credit program has been criticized for being in favor of the real estate sector which results in complex transactional structures that are difficult to determine accountability of their finances and lacks transparency. The program is said to be a duplicate of other government programs that have the same purpose such as the recovery zone bonds.  It shows that a lot of tax payers' money is used in duplicative projects.  Investors are said to claim a return on the higher value of the project than the value they invested in because the projects in the low-income areas are highly undervalued and combine federal tax credits to finance the projects (.Burge et al. 72)

            Banks or investors participate in building low-income housing facilities to receive CRA consideration in which the activities are undertaken by the bank improve its assessment area. Earning financial returns is another key reason why banks participate in LIHTC as opportunities arise as they undertake this projects which results in high levels of income to the banks. It helps the banks gain additional lending opportunities as they expand their customer relationships into new areas through the financing of these projects. The financing of new projects come with additional loan products and bank services which creates a new opportunity for the banks to undertake to expand their services. In addition to this, it helps banks leverage other tax credit investments as these projects use multiple forms of credits which increases the internal rate of return of the banks or the investors who undertake these projects.

            The size of investment will determine the pricing of the LIHTC as big investments will expect to have a higher price than that of a small investment. The length of the investment period determines the price of the LIHTC as longer time spans will attract a higher price while low time spans require a lower price.Fishbein et al. 293

            The Hope VI underlying assumptions of the benefits of the mixed-income housing include increased access to high-quality assets in the neighborhood by all the people who live in the areas. This is because isolated communities lack the power to claim for better services for themselves. There is an increased tax for the home owners as a result of quality assets that are provided. The mixed-income housing increases social capital as market actors respond quickly and more people can get a job.

            The program helps change the mindset of the people as they are not all poor. The benefits are not achieved as the program increased stigma and marginalization as no goals of integration are made. Hope VI did not succeed as per the equity and community development as their new houses could not be accessed by their origin lowers anymore. The relocation of people to other areas increased stigma and marginalization to the low-income earners. The program managed to bring quality homes but did not bring integration between the different social classes in the area.             The community development programs rely on tax expenditures because they are considered to be off the budget and attract many investors who help in carrying out the activities of the project through financing of the projects. Tax deductions help in the in the development in low-income areas faster than the congressional appropriation process.(Perloff et al. 174)

Works Cited

Burge, Gregory S. "Do tenants capture the benefits from the low‐income housing tax credit   program?." Real Estate Economics 39.1 (2011): 71-96.

Chaskin, Robert J., and Mark L. Joseph. "‘Positive’Gentrification, Social Control and the ‘Right        to the City’in Mixed‐Income Communities: Uses and Expectations of Space and        Place." International Journal of Urban and Regional Research 37.2 (2013): 480-502.

DeFilippis, James. "The myth of social capital in community development." Housing policy  debate 12.4 (2001): 781-806.

Fishbein, Allen J. "The Community Reinvestment Act after fifteen years: It works, but             strengthened federal enforcement is needed." Fordham Urb. LJ 20 (1992): 293.

Fisher, Peter S., and Alan H. Peters. "Industrial incentives: Competition among American states          and cities." (1998).

Fund, C. D. F. I. "New Markets Tax Credit Program." (2017).

Perloff, Jeffrey M., and Michael L. Wachter. "The new jobs tax credit: an evaluation of the 1977-         78 wage subsidy program." The American Economic Review 69.2 (1979): 173-179.

August 18, 2023


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