A House Republican is objecting to an expansion of tax credits for low-income housing included in major fiscal overhaul the party had hoped to advance this week, illustrating the difficulties facing leadership as they try to keep all members of the party in line on the legislation.
Rep. Glenn Grothman (R-WI) told the Washington Examiner that he opposes the low-income housing tax credit or LIHTC, a major program that subsidizes the construction of housing for families with low incomes, and objects to a provision in the sweeping tax overhaul that would expand the credit by about $14 billion over the next decade.
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“It’s ridiculous that the credit is still in a Republican bill, much less that they’re expanding it,” Grothman told the Washington Examiner on Thursday. “I mean, I think it shows a lack of sincerity on the part of leadership in trying to shrink the role of government.”
Grothman stopped short of saying outright that he would oppose the broader tax legislation over the measure. Nevertheless, resistance on his part clouds the bill’s chances of advancing in a Budget Committee vote scheduled for Friday morning. Passage in the panel is key to advancing the bill, which is meant to enact many of Trump’s domestic priorities, through reconciliation, a budget process that allows legislation to pass with simple majorities in the House and Senate.
Even beyond the Budget Committee, any one member of the Republican conference has significant leverage over the bill because of the slim margin of the party’s control of the lower chamber. Leadership can only lose three Republicans and still pass the bill. Other members of the GOP have used that leverage to shape the legislation. Most notably, Republicans from New York and California are on track to win an increase in the amount of deductions allowed for state and local taxes paid by threatening to tank the bill.
Managing all the varying and opposing demands of Republicans is turning into a monumental task for leadership.
For Grothman, expanding LIHTC is a problem because, he said, the program is poorly designed. “The program clearly benefits banks and developers more than it does low-income or working class people,” he said in a separate interview last week.
LIHTC is a $13.5 billion annual break for developers that set aside units for families under certain income levels.
The credit, which was created in President Ronald Reagan’s 1986 tax reform, has strong support in both parties. It is backed by developers and also investors, who can buy the tax credits from investors. It also has support from antipoverty groups, as it is the largest source of “affordable” housing, accounting for over 3 million units constructed since its inception.
But some outside analysts are critical of the program on the grounds that much of its benefits are captured by the industry and that it doesn’t help alleviate the supply shortages that have driven up the cost of housing.
Grothman, the chairman of the Oversight Committee’s subcommittee on health care and financial services, held a hearing last week that featured testimony critical of LIHTC. Chris Edwards, a fiscal expert at the libertarian Cato Institute, said in his prepared testimony that the credits “raise the costs of housing projects and partly displace market-based housing. They generate fraud and corruption in some places, and only a portion of the tax benefits go to tenants.”
Studies over the years have found that low-income families only receive a relatively small portion of the value of the tax break. A 2024 analysis, for example, found that developers capture half of the subsidy, and spend another quarter of it competing for the credits.
It is thought that the credit might not provide much of an advantage to poor families because it merely “crowds out” construction that would have otherwise been done by the private sector.
Grothman said the credit should be terminated, but at a minimum it should not be expanded as part of the Republican megabill, which would extend the 2017 Trump tax cuts.
The bill advanced by the Ways and Means Committee this week, though, does include provisions to expand LIHTC. Specifically, it would increase the amount of credits available for allocation by states, and to make funding for more units available if they are partially financed by municipal bonds. It would also expand eligibility for credits on Native American lands and rural areas.
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Those changes roughly track the outlines of bipartisan legislation introduced by Rep. Darin LaHood (R-IL) in the House and Sen. Todd Young (R-IN) in the Senate.