Identical bipartisan bills to beef up the federal Low Income Housing Tax Credit (LIHTC) program are now before the House and Senate and have the support of groups as diverse as the National Association of Home Builders (NAHB) and The ACTION Campaign.
The latter is a coalition of more than 2,400 national, state, and local nonprofit and for-profit enterprises that says the housing credit -- first introduced in 1986 -- is "critical to the creation and preservation of affordable housing nationwide. As the need for homes continues to grow, the program must be expanded and enhanced."
The NAHB, meanwhile, says, "The Affordable Housing Credit Improvement Act (AHCIA) will help boost the production of sorely needed affordable rental apartment units. NAHB strongly supports this bill and will urge Congress to move quickly to pass this legislation."
The LIHTC has long been a popular tax incentive for real estate investors to use to put money into affordable housing projects, and the changes being sought are expected to make it even more attractive.
Adding to 35 years of financing affordable housing
In its first 35 years, the LIHTC has financed nearly 3.5 million homes for more than 8 million households, including veterans, seniors, people with disabilities, and families, The ACTION Campaign says in a one-page summary of the bills' highlights.
Backers say the LIHTC upgrade would lead to the financing of more than 2 million additional multifamily units over the next decade, as well as help create nearly 3 million jobs, $346 billion in wages and business income, and nearly $120 billion in additional tax revenue while addressing an affordability crisis made worse by the pandemic.
The AHCIA has already been introduced three times before, and last year, one part of it was enacted: a minimum 4% housing credit rate.
"This year's legislation largely mirrors the 2019 version of the AHCIA, with the addition of a few key provisions to further strengthen and improve the housing credit," The ACTION Campaign says.
Adds NAHB Chairman Chuck Fowke, "With nearly 11 million renter households severely cost-burdened, the Affordable Housing Credit Improvement Act would greatly enhance our ability to meet the growing demand for more affordable rental units."
A list of some of the investor highlights
Here are a few of the bill's highlights as listed by the National Council of State Housing Agencies (NCSHA):
- For extremely low-income households, there's a 50% basis boost for projects that reserve units at applicable rent amounts.
- The annual housing credit volume cap would also be raised 50%.That's for both per-capita and small-state minimums.
- The bond-financing threshold would be set at 25%. It's now 50%. NCSHA says that alone could result in 1.5 million more units financed over 10 years.
- A 50% increase in the 9% credit allocations, which are typically reserved for new construction.
- Other provisions that address areas such as simplifying rules around students, related parties, and casualty loss requirements, to name a few, as well as incentives for preserving existing affordable housing.
Targeting NIMBYism with a rule change and a name change
Interestingly, the NCSHA says, there's also "a provision to prohibit local approval requirements that can lead to NIMBYism."
NIMBY, of course, stands for not in my back yard, and the new rules would target local zoning deemed to prevent otherwise-worthy projects. In fact, the 2019 version of the bill, the original version that now has been carried over, with some enhancements, to this year, would change the official name of the LIHTC to the Affordable Housing Tax Credit.
That's because, according to an 11-page summary of the bill available from The ACTION Campaign here, "the official name of the Low Income Housing Tax Credit sometimes exacerbates NIMBY opposition to proposed developments" financed by the Housing Credit.
The Millionacres bottom line
The bipartisan nature of the support for this bill -- just introduced last week -- plus the long record already for the LIHTC and an array of other such tax incentives, may bode well for its passage, as does the impression the Biden administration has given so far that it supports public and affordable housing.
To wit: The $213 billion included in the president's American Jobs Plan -- the infrastructure bill -- would seek to build and/or renovate more than 2 million "affordable and sustainable places to live," including more than 500,000 homes in low- and middle-income areas.
If you're interested in advocating for the passage of the expanded tax credits for low-income housing -- in the form of the Affordable Housing Credit Improvement Act of 2021 -- here's a link with more information about the bills themselves and contact info for members of Congress. Heck, you can use those same contacts to express your opposition, too.