As said in one of America’s all-time favorite movies, “There is no place like home.” The importance of a home to call your own is shared all across this country by families at every income level. This is not just for those who own a house. It applies as well to the 36 million families that make their homes in rental housing.

Right now, there is tremendous turbulence in our housing sector, and these issues are very much on the minds of the American people and of the Congress. Home values are declining and as a result, borrowers are struggling to meet their mortgage obligations. Many are faced with losing their homes to foreclosure. A host of others, especially low-income families, seniors, the disabled, and even some veterans, must confront the challenges of finding a safe, affordable place to live near where they work and go to school.

Congress and the administration have taken some initial steps to respond to the current troubles in the housing market. There is more work to be done, particularly when it comes to our ability to meet the growing demand for — and diminishing supply of — affordable housing.

Often when Congress looks for solutions, we try to craft new programs or find ourselves reacting to government programs that are broken. When it comes to how best to support investment and construction of affordable housing in our states, however, we can instead simply look at modernizing a 20-year-old program that has a proven track record of success — the low-income housing tax credit program.

The low-income housing tax credit program was created as part of the Tax Reform Act of 1986 and made permanent in 1993. Designed as a public/private funding partnership, largely administered by the states, this program has become the most successful housing production program in existence.

These tax credits make it attractive for investors to forego highly profitable luxury residences, in order to provide housing for those most in need. Without affordable housing, many low-income Americans would find themselves on the street. Instead, these families can provide shelter to their children and have a secure place to live.

State agencies award housing tax credits to housing developers, who turn the credits into construction funds by selling them to investors. These funds allow developers to borrow less money and pass on the savings in lower rental rates for low-income tenants.  Investors, in turn, receive a 10-year tax credit based on the cost of constructing or rehabilitating apartments that cannot be rented to anyone whose median income is higher than 60 percent of the median income in the area.

Since its inception, this program has created nearly 2 million homes for low-income families at restricted rents for terms of at least 30 years — housing that would not have occurred without the tax credit.

Credits are allocated to the states based on population. Each state sets its own housing priorities, and developers compete aggressively to meet these priorities. The credit is responsive to the needs of local communities. It works for new construction, rehabilitation, and preservation of affordable housing. It works in cities, suburbs and rural areas. It revitalizes low-income communities. It serves families, the elderly, the disabled and the homeless.

The program is cost-efficient and has a high compliance rate. The marketplace imposes discipline on the program so that taxpayers’ dollars are well-spent. Investors receive their tax credits only if housing is built on time and on budget, operates successfully within local housing markets, and is well maintained over time. The annual failure rate for housing credit properties is .02 percent annually, well below that for other housing or commercial real estate.

The tax credit program may be invisible to the people who now have a roof over their head, but it is indispensible to our ability to meet the growing demand for — and diminishing supply of — affordable housing.

In Washington state, for example, Port Orchard Vista — a 42-unit apartment building for low-income seniors — would not have been built without the tax credit program. One resident, a 62-year-old grandmother named Jackie, would be homeless if this project had not been built. Jackie’s Social Security check is $600 per month. Her rent was $605, not including utilities — or groceries! She was selling her furniture and her mom’s old cookbooks to make up the difference. She was just a few months away from being homeless.

Thanks to the tax credits, the Kitsap County Consolidated Housing Authority was able to get this project built and keep Jackie off the street. Today, Jackie’s rent is $200 — including utilities.

Another property, the Village at Overlake Station in Redmond, Wash., was built in 2001 and offers beautiful public spaces and apartment homes. Sarah, a single mother, came to Overlake Station in late 2005 after spending that summer and fall living out of her vehicle with her two children. She was extremely grateful to find a suitable, affordable apartment before the cold weather came. She and her children were forced to huddle together in the backseat of her car to stay warm as they slept and she was concerned about their safety. Though she tried to be cautious, she just knew she should find a better way to take care of her children.

Sarah and her children have proudly lived at Overlake for two years. Soon they will move into a new house, thanks to Habitat for Humanity. In two years, Sarah has gone from homelessness
to homeownership.

These stories can be replicated in every community across the country.

By leveraging private capital to build affordable housing units, we are also helping our local communities. People left with no affordable housing options join the ranks of the homeless and then become the responsibility of our cash-strapped communities. We can alleviate some of the community responsibilities of caring for the homeless, the disabled, and other vulnerable low-income families by helping to provide these people an affordable place to call home.

As successful as the housing tax credit program is, it could benefit significantly from updating, which is why I, along with several of my Senate colleagues, introduced the Affordable Housing Investment Act of 2008. This legislation removes various restrictions that impede coordination with other federal housing policies and programs that have only frustrated efforts to address local needs and added unnecessary legal and accounting costs. The bill also helps foster low-income community revitalization by facilitating the construction of child care, primary healthcare, recreation and other community service facilities and aiding with the specific needs for housing in rural areas.

In 2002, the Millennial Housing Commission, said in its final report to the Congress: “Securing access to decent, affordable housing is fundamental to the American Dream. All Americans want to live in good-quality homes they can afford without sacrificing other basic needs.”

Right now, more than 70 percent of the lowest-income renters in this country are paying more than half their income for housing. That leaves very little for the rest of life’s necessities. The picture is not much brighter for working families with modest incomes who are finding themselves squeezed by higher energy costs, heathcare costs, food bills and job insecurity.

Over the coming decade, the Joint Center for Housing Studies of Harvard University projects that the number of renter households will increase by 1.8 million. The supply of affordable rental housing also will grow, but not enough to satisfy this level of demand.

Unless we can encourage the development of more affordable housing units these families in need will find themselves priced out a decent place to live. Congress and the administration must take a balanced approach to housing that supports the needs of all households.

Cantwell is a member of the Senate Finance Committee.