The Houses that Eminent Domain and Housing Tax Credits Built: Imagining a Better New Orleans

Posted: 6 Oct 2011

See all articles by Carol Necole Brown

Carol Necole Brown

University of Richmond School of Law

Date Written: October 6, 2007

Abstract

Proposals for investing in and rebuilding urban enclaves such as New Orleans are layered with controversy and difficulty. One of the most significant impediments to rebuilding New Orleans will be addressing the need to replenish the depleted rental housing market. Racial and economic integration of housing markets and appropriate use of private sector money to replenish the rental housing stock within a “reasonable” time period are indispensable components of a responsible revitalization and renewal plan. This Article contends that a combination of the smart exercise of eminent domain and of “housing production subsidies” -- housing tax credits -- is necessary to rebuild the rental housing market in New Orleans. In a climate of appreciating markets, private developers do not have natural incentives to construct affordable rental housing. If provided the proper financial motivation, prescient developers will step in and invest in the New Orleans and regional rental markets. There is no guarantee that developers will reap huge profits in the affordable rental housing market, even under optimal market conditions. Certainly, post-natural disaster conditions -- widely dispersed populations, high unemployment levels, devastated infrastructure, disorganization and finger-pointing, and a lack of a unified vision of what the reconstructed built environment should be -- pose even greater uncertainties for developers.

A thoughtful approach to eminent domain, combined with strategic use of housing subsidies, can complement other aspects of regional comprehensive planning as New Orleans and the surrounding communities move forward. One of the most promising tools available to address rental housing needs is the Low Income Housing Tax Credit program (“LIHTC”). Created by the Tax Reform Act of 1986, the LIHTC is currently the most significant program that seeks to meet poor citizens' needs for rental housing production and rehabilitation. LIHTCs increase the nation's rental housing stock for the poor by targeting high-income taxpayers. The program “provides an incentive for the construction and rehabilitation of low income rental housing by lowering its overall cost through the use of tax credits to developers and owners of qualified rental projects.” The U.S. Department of the Treasury administers the program in conjunction with the housing finance agencies of the states and some cities. Having produced almost 1.3 million units of housing between 1987 and 2003, the LIHTC has eclipsed the public housing program and holds great promise as a program for increasing mixed-income housing and racial integration.

Keywords: low income housing tax credits, eminent domain, New Orleans, race

Suggested Citation

Brown, Carol Necole, The Houses that Eminent Domain and Housing Tax Credits Built: Imagining a Better New Orleans (October 6, 2007). Available at SSRN: https://ssrn.com/abstract=1939841

Carol Necole Brown (Contact Author)

University of Richmond School of Law ( email )

28 Westhampton Way
Richmond, VA 23173
United States
804-484-1626 (Phone)
804-289-8992 (Fax)

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