LOS ANGELES—In what appears to be a classic case of unintended consequences, Congressional Republicans may be on the verge of eliminating a key source of funding for affordable housing projects. The first draft of the House's tax-reform package calls for the elimination of private activity bonds, which are used in connection with 4% Low-Income Housing Tax Credits to build, buy and renovate affordable housing—and thereby make possible much of the affordable housing sector's activity.

“We don't think the Republicans are aware of the effect this would have,” says Scott Alter, co-founder and partner in national developer Standard Communities, which specializes in the affordable sector. “We're working with two coalitions to try to get the word out.”

Alter's Standard Communities partner, co-founder Jeffrey Jaeger, sums up what that effect would be as far as the affordable housing sector is concerned: ““Private activity bonds are the linchpin that allows you get the 4% tax credit,” he says. “With the elimination of the private activity bonds, unless there are other changes forthcoming, that would theoretically cut out about half of the affordable housing that's done each year.”