How Community Development Tax Incentives Have Benefited Primary States: South Carolina

Published by Peter Lawrence on Thursday, February 27, 2020 - 12:00am

While national attention is turned to South Carolina for the democratic primary, now is a good time to assess how the community development tax incentives have benefited the state. By highlighting the positive impacts the incentives have had on the state’s communities and residents, support for these incentives can be strengthened. This look at South Carolina is the fourth in the series, and follows a profile on Nevada.

Politics

Democratic presidential primary: Feb. 29, 2020

Republican primary will not be held this year

Delegates: 63 democratic (54 pledged, 9 unpledged), and 22 pledged republican delegates

Allocation method: Proportional

Electoral votes: 9

2016 Democratic primary election results: Hillary Clinton won South Carolina by 73 percent to 26 percent over Bernie Sanders

2016 Republican primary election results: Donald Trump won South Carolina by 33 percent to 22 percent over Marco Rubio

2016 general election results: Donald Trump won South Carolina by 54.9 percent to 40.7 percent over Hillary Clinton

Demographic, Economic, and Housing Background

Out of all residents in South Carolina, 16.6 percent live below at or below the poverty line. According to the Census Bureau, this percentage is slightly higher than the national poverty rate of 14.6 percent. Additionally, the median household income in South Carolina stands at $50,570 per year, which is much lower than the nation’s median of $63,179 per year.

Although South Carolina’s housing rental market is slightly cheaper than the national market (the median rent for a two bedroom is $791 per month, whereas nationwide it is $964 per month), the Harvard Joint Center for Housing Studies reports that the percentage of rent burdened South Carolinians is slightly higher (at 51 percent) than the national average of 47.4 percent. In addition to rent burden, South Carolinians also face high eviction rates. According to the Eviction Lab, South Carolina is the state with the highest eviction rate. For every 100 renter-occupied households, 8 percent are evicted. This is much higher than the eviction rate for the nation at a whole, which is slightly above 2 percent. In South Carolina alone, the National Low-Income Housing Coalition (NLIHC) finds that there is a shortage of 84,056 affordable and available homes.

Low-Income Housing Tax Credit (LIHTC) Investment

According to the Census, 27 percent of renter households in South Carolina are extremely low-income households. Out of these households, 70 percent are severely cost-burdened. The National Council of State Housing Agencies has calculated that since 1987, 44,457 rental homes that have been created due to the low-income housing tax credit. In 2018 alone, the 9 percent and 4 percent credit together created 3,094 affordable rental homes. Out of these homes, 1,001 were new construction, and 2,093 were substantial acquisition/rehabbed homes. ACTION found that since 1987, 96,567 low-income households have lived in LIHTC housing. Additionally, 46,833 jobs have been supported, and $4.5 billion have been generated in wages and business income. The map below shows the graphical dispersion of LIHTC properties in South Carolina.

 

Blog graphic: LIHTC properties, poverty rates in South Carolina
Click to Enlarge.

                               

New Markets Tax Credit (NMTC) Investment

The New Markets Tax Credit Coalition estimates that approximately $1.8 billion has been invested in South Carolina qualified low-income community investments (QLICIs) between 2003-2019. These funds have gone on to support 85 different community development projects and have created 15,700 jobs. Different projects supported include the construction of recreation centers for young athletes, the revitalization of a historic bakery that will partner with the local high school to provide internships, and other mixed use spaces that will bring jobs to a variety of communities within South Carolina. One project that has experienced great success is the Horsehead Corporation project, which included a recycling facility in rural Barnwell, S.C. This facility brought more than 500 new jobs for the local residents, who were facing a high unemployment rate. In addition to jobs, $16.7 million was brought to the community in an increase to employee’s wages because of the NMTC.

Historic Tax Credit (HTC) Investment

South Carolina has benefited from the historic tax credit (HTC) for more than a decade. The National Trust for Historical Preservation reports that from 2002 to 2018, 149 projects have been financed using the HTC, and this investment has generated more than $522 million in total (both household and business) income. A variety of properties have updated revitalized with the HTC, including old cigar factories and mills. These properties have been revamped into spaces such as mixed-use buildings and housing, and HTCs have also been used to repair historic properties after getting damaged in natural disaster, such as hurricanes Harvey, Irma and Maria. One example of a successful project is the Jackson Street Cottages, built in the late 1800s, and originally inhabited by working class families but eventually left abandoned for years. After the HTC funded restoration, they now house tenants who work in the service and hospitality industry. According to Rutgers University, the HTC has created 589 jobs in South Carolina between 2014 to 2018, and had grown the South Carolina GDP by $31.9 million between those years.

ITC and PTC

According to the Solar Energy Industries Association, South Carolina currently has an installed 1,049 MW of solar capacity, due to the investment tax credit. Thanks to this solar capacity, 122,407 homes have been powered in South Carolina. This solar capacity has also created 2,983 jobs. According to the American Wind Energy Association, there are 15 active manufacturing wind facilities in South Carolina that have used production tax credit funding. These facilities have created between 501 to 1,000 jobs. The graphic below illustrates the results that the community development tax credits have brought to South Carolina.

 

Blog chart: Tax incentive use in South Carolina
Click to Enlarge

 

Opportunity Zones

Sen. Tim Scott, R-S.C., has been instrumental in implementing the original Opportunity Zones legislation, as well as expanding the bill to ensure reporting requirements are implemented to protect communities. South Carolina has 135 designated OZs and the demographics of the OZs are similar to those of the nation.  

Similar to the nation as a whole, South Carolina’s opportunity zones are majority-minority areas – with a minority population of 56 percent. The poverty rate of OZs nationwide is 29 percent, which is on par with South Carolina’s opportunity zones poverty rate of 27 percent. Rent burdened renters make up 56 percent of South Carolina’s OZs, while 55 percent of renters are rent burdened in the nation’s OZs. The median family income for South Carolina OZs ($43,000) is very similar to the nationwide OZs ($44,700). Lastly, the distribution of metro vs. non-metro in opportunity zones is similar nationwide and in South Carolina (29 percent of SC OZ’s are non-metro and 23 percent of the nations are non-metro).

 

Blog chart: South Carolina OZs
Click to Enlarge