Business investment in affordable housing hasn't fully rebounded after the corporate tax rate cut in the 2017 federal tax law, leaving state housing officials and developers still scrambling to make up for lost equity in low-income housing tax credit deals, according to Law360.

A side effect of the Tax Cuts and Jobs Act’s slashing of the corporate income tax rate to 21% from 35% was to lower the value of federal housing tax credits. These are awarded by state housing finance agencies each year to affordable housing developers to raise money for multifamily housing with 30-year restrictions on tenants' income levels and rents.

With lower tax rates in effect, corporate investors aren't willing to pay a premium for housing tax credits, said Pillsbury Tax partner Thomas D. Morton. Since less tax credit equity is available, affordable housing deals now require higher levels of debt financing, which can make it more challenging for them to remain financially stable.

“If you're trying to attract equity dollars from an investor in a low-income housing tax project, the bottom line is you've got reduced benefits that an investor will pay for, which translates into reduced equity that goes into the project,” Morton said.