Federal COVID-19 Response
and the Housing Credit

Legislative and Regulatory Priorities
for COVID-19 Relief and Recovery

Prior to the COVID-19 crisis, over 10.5 million households spent more than half of their income on rent. Today, millions of workers have lost their livelihoods or had their wages reduced due to the crisis, and many impacted renters are likely to become housing cost-burdened if they were not already. As the affordable housing shortage continues to grow, the Low-Income Housing Tax Credit (Housing Credit) will be needed more than ever.

Unfortunately, the COVID-19 crisis has brought on serious barriers and challenges that, without policy solutions, put our affordable housing system at risk by threatening the immediate development and operation of Housing Credit properties. These barriers include the precipitous drop of the 4 percent Housing Credit rate, which in response to the crisis was set to a minimum 4 percent rate beginning in 2021. Additional barriers include construction labor shortages and delays that increase development costs; the unavailability of gap financing due to the cost of the COVID-19 crisis to state and local governments; financial penalties for missed development deadlines; market instability that can increase costs and decreases Housing Credit equity; increased operating expenses compounded by decreased rent payments; and other unforeseen obstacles.

To provide both immediate emergency relief and to assist in the future economic recovery, the AHTCC is advocating for the following policies as part of COVID-19 response legislation:

Legislative Priorities for Immediate Emergency Relief

ENACTED: Minimum 4 Percent Housing Credit Rate

  • A minimum 4 percent Housing Credit rate was enacted on December 27, 2020, as part of a year-end legislative package.
  • The permanent minimum 4 percent Housing Credit rate is effective for (1) any building which receives an allocation of Housing Credit dollar amount after December 31, 2020, and (2) in the case of any building any portion of which is financed with an obligation described in section 42(h)(4)(A), any such building if any such obligation which so finances such building is issued after December 31, 2020. Though we and our partners had been urging that the minimum rate apply to any developments placed in service after January 20, 2020, it was determined that new tax policies in this package would generally only apply prospectively. See the bill text here.
  • The minimum 4 percent Housing Credit rate is a key provision in the bipartisan AHCIA of 2019, which is co-sponsored by more than half the House of Representatives and 40 percent of the Senate. The provision is also included in the House-passed Moving Forward Act infrastructure legislation, Senators Ron Wyden (D-OR) and Maria Cantwell’s (D-WA) Emergency Affordable Housing Act of 2020 and Senate Democrats’ Economic Justice Act, and gained the support of 103 bipartisan members of the House who signed a letter to leadership urging its passage this summer.
  • In 2020, the so-called “4 percent” Housing Credit rate has fell to all-time lows as a result of the COVID-19 pandemic and the ensuing cuts to federal borrowing rates, putting at risk the financial feasibility of many affordable housing properties. Hovering between 3.07 and 3.09 percent in recent months, the increase to 4 percent in 2021 will make available an infusion of Housing Credit equity into developments for which additional financing is necessary, providing for an additional 130,000 affordable homes from 2021 to 2030, according to Novogradac and Co.
  • Learn more about the 2020 year-end legislative package here.

Allocate Additional Funding to Stabilize Existing Affordable Housing Properties

  • In response to the COVID-19 pandemic, $25 billion in Emergency Rental Assistance (ERA) was passed on December 27, 2020, through a bipartisan year-end legislative package, and an additional $21.55 billion was passed on March 10, 2021, through the American Rescue Plan. The latter funds were allocated by the Treasury Department on May 7, 2021, and were released in conjunction with guidance to expedite funds to renters and target those most severely in need of assistance.  The AHTCC applauds this relief which is a critical piece of our response to the pandemic and will provide much-needed financial relief for millions of Americans.
    • For many households whose incomes have been reduced or lost entirely due to the COVID-19 crisis, unemployment benefits are not enough to pay the rent while also meeting other needs, like health care and food. While eviction moratoriums may keep families in their homes for the near-term, the accrual of rent payments over time may only put them at greater risk of eviction in the future. Additional rental assistance is needed to fill the gap between households’ current income and what they need to stay in their homes while still meeting their daily needs.
    • Affordable housing properties have also been impacted by reduced operating budgets as a result of the crisis. The policies enacted to keep people in their homes during the crisis, like eviction moratoriums, also require counterbalancing measures to fund operating expenses, pay or resume paying debt service, and replenish operating reserves on affordable properties in the absence of cash flow from rent. Additional emergency operating funding may also be needed as properties respond to the unprecedented health crisis. Without assistance, owners may not be able to fulfill their obligations to ensure a safe living environment or provide the services that are helpful to support self-sufficiency and educational attainment, such as job training or after-school programming.
  • As one of the most flexible affordable housing funding sources, providing additional HOME Investment Partnership Program (HOME) funds would help stabilize low-income families, cover increased operating costs associated with addressing COVID-19 related expenses, replenish operating reserves that are being depleted as cash flow from rent declines, and stimulate the preservation and production of additional affordable homes.

Legislative Priorities for Long-Term Economic Recovery

Lower the "50 Percent Test" for 4 Percent Housing Credit Properties

  • Affordable housing developments are eligible for the maximum amount of 4 percent Housing Credit equity
    if at least 50 percent of the cost of development is financed with Private Activity Bonds. However, this threshold creates inefficiencies and limits the affordable housing that states are able to fund.
  • Lowering the “50 Percent Test” bond financing threshold to 25 percent could provide as many as 1.5 million additional affordable homes through the Housing Credit and Private Activity Bonds over the next ten years. It would also free up over $93.2 billion in PAB cap over the next ten years, allowing states to spend those resources on more affordable housing, infrastructure, or other needs.
  • Learn more about why the 50 percent test should be lowered here.

Increase the 9 Percent Housing Credit Allocation by 50 Percent

  • Increasing the 9 percent Housing Credit allocation would help to address the increased demand for affordable homes that is resulting from the economic crisis. As the nation’s primary tool for financing affordable housing, additional Housing Credit resources will be needed for any significant increase in affordable housing production or preservation. A 50 percent increase would provide hundreds of thousands of crucially needed affordable homes for low-income households across the country at a time when the need will be greater than ever before.
  • This provision would be phased in over two years at 25 percent per year and adjusted for inflation, beginning in 2021. Once the immediate obstacles directly related to the current crisis are resolved, the Housing Credit community will be prepared to focus on a significant increase in rental housing production in 2021 and beyond in response to the heightened need.

Provide Additional Basis Boosts

  • Providing basis boosts would supply needed equity for developments that would not otherwise be financially feasible.
  • These basis boosts would assist properties challenged by COVID-19 and assist in economic recovery, as explained by a Novogradac & Co. post.

We propose the following basis boosts:

  • 30 percent basis boost for developments financed using Multifamily Private Activity Bonds, bringing parity with the current basis boost available for Housing Credit properties financed without Multifamily Private Activity Bonds,
  • 50 percent basis boost for developments serving extremely low-income tenants,
  • 30 percent basis boost for developments in rural areas, and/or
  • 30 percent basis boost for developments in Native American communities.

Address Adjuster Issues Resulting from COVID-19 Crisis

  • The COVID-19 crisis is causing significant construction and development delays, pushing construction completion and lease-up well beyond anticipated deadlines in some cases. Because of the financing and partnership agreements governing Housing Credit properties, missed deadlines can have serious implications for all parties involved. For those developing Housing Credit properties, delays can result in significant financial penalties, referred to as “adjusters,” which were standard partnership agreement provisions before the COVID-19 crisis hit, and could create funding gaps that threaten developments’ financial feasibility. As a result, many of these properties may require additional gap financing sources, which are very difficult to access as state and local funds that may have been allocated toward community development have now been redirected toward the immediate COVID-19 response.
  • For properties facing this problem, we propose temporarily allowing more Housing Credits to flow in a project’s first tax credit year, thereby limiting the loss of funding. This proposal would permit owners to elect a 150 Percent First Year Credit, meaning that the partnership would be eligible to claim 150 percent of the credits it would otherwise have been eligible to claim in the first tax credit year, with prorated deductions over the balance of the credit period. This concept mirrors a legislative change adopted in the Revenue Reconciliation Act of 1990, which was also implemented to facilitate Housing Credit investment during a disruption. It does not affect the amount of Housing Credits a property receives – it simply frontloads allowable credits in the first tax credit year to help cover these temporary gaps.

Regulatory Priorities for Immediate Relief 

Provide Regulatory Accommodations for the Housing Credit

On January 11, 2022, the Internal Revenue Service issued guidance (IRS Notice 2022-05) to extend key Housing Credit program deadlines and provide other flexibilities in light of continued barriers to the construction and operations of Housing Credit properties due to the COVID-19 pandemic. Many of these regulatory accommodations had previously expired, after they were initially provided in July 2020 (IRS Notice 2020-53) and further extended in January 2021 (IRS Notice 2021-12). The AHTCC submitted a letter to the IRS and Treasury Department in September 2021, urging for Housing Credit regulatory relief, and we have continued to push for these extensions along with the National Council of State Housing Agencies (NCSHA) and other partners. See our blog for more information and see a matrix developed by NCSHA comparing the newest guidance to previously enacted guidance and NCSHA’s guidance recommendations.

Learn more about Housing Credit IRS guidance in response to the COVID-19 pandemic in our Regulatory Issues Resource Center.

Additional Information

Congressional Support for Housing Credit Priorities

Congress Passes Minimum 4 Percent Housing Credit Rate

Passed by Congress on December 22, 2020, and signed into law on December 27, 2020, bipartisan year-end legislation included a minimum 4 percent Housing Credit rate along with a disaster Housing Credit allocation, $25 billion in emergency rental assistance and other COVID-19 relief measures, Fiscal Year 2021 appropriations bills and additional tax provisions. The inclusion of the minimum 4 percent Housing Credit rate is a testament to the strong bipartisan support for the Housing Credit, and the AHTCC thanks our Housing Credit champions in Congress – Affordable Housing Credit Improvement Act (AHCIA) lead sponsors Senators Maria Cantwell (D-WA), Todd Young (R-IN) and Ron Wyden (D-OR), and Representatives Suzan DelBene (D-WA), Jackie Walorski (R-IN), Don Beyer (D-VA) and Kenny Marchant (R-TX); congressional leaders, including Senate Minority Leader Chuck Schumer (D-NY) as well as House Speaker Nancy Pelosi (D-CA) and House Ways and Means Committee Chairman Richie Neal (D-MA); and the more than 260 other members of Congress who have signed onto Housing Credit legislation; for their support of the Housing Credit.

House Approved Infrastructure Package Would Expand and Strengthen Housing Credit and Housing Bonds

On July 1, the House of Representatives passed infrastructure legislation, the Moving Forward Act (see outline, section-by-section, and bill text), which includes the AHTCC’s COVID-19 response priorities to set a minimum 4 percent Housing Credit rate, lower the “50 percent test” bond-financing test to 25 percent, significantly expand the Housing Credit allocation (the legislation provides a 60 percent increase), provide targeted basis boosts, and address “adjuster” issues through an accelerated first-year credit. Learn more about the legislation on our blog.

Senators Wyden and Cantwell Introduce Emergency Affordable Housing Legislation

On June 25, Senate Finance Committee Ranking Member Ron Wyden (D-OR) and lead sponsor of the Affordable Housing Credit Improvement Act Sen. Maria Cantwell (D-WA) introduced the Emergency Affordable Housing Act of 2020, legislation mirroring the Housing Credit provisions included in the House infrastructure proposal, the Moving Forward Act, which passed the House of Representatives on July 1. Sens. Michael Bennet (D-CO) and Ben Cardin (D-MD) signed on to the legislation as original co-sponsors. See the press release, one-page summary, detailed summary, and bill text, and learn more on our blog.

AHCIA Lead Sponsors Send Bipartisan Letter to Congressional Leaders

On April 16, 2020, Affordable Housing Credit Improvement Act lead sponsors Representatives Suzan DelBene (D-WA), Kenny Marchant (R-TX), Don Beyer (D-VA) and Jackie Walorski (R-IN) sent a bipartisan letter to House Speaker Nancy Pelosi (D-CA) and House Minority Leader Kevin McCarthy (R-CA) urging the inclusion of crucial tax policies to support affordable housing as part of COVID-19 relief legislation. The letter calls for a minimum 4 percent Housing Credit rate and reducing the  “50 percent test” for bond-financed housing. See Rep. DelBene’s press release and learn more on our blog.

Chairman Neal and Rep. DelBene Write to Treasury on Regulatory Relief

In a letter sent on April 10, 2020, House Ways and Means Committee Chairman Richard Neal (D-MA) and lead sponsor of the Affordable Housing Credit Improvement Act Suzan DelBene (D-WA) urged the Treasury Department and the Internal Revenue Service to provide regulatory relief needed to ensure the continued development of affordable housing through the Housing Credit. The letter mirrors recommendations from the NCSHA and includes the extension of certain deadlines and the removal of additional barriers.

New Democrat Coalition Includes Housing Credit in COVID-19 Response Priorities

On March 19, 2020, the New Democrat Coalition, a U.S. House of Representatives caucus of more than 100 Democrats committed to pro-economic growth, pro-innovation, and fiscally responsible policies, released their economic recommendations in response to the COVID-19 crisis. The list includes a minimum 4 percent Housing Credit rate and one-year extensions to key Housing Credit deadlines, both of which were recommended by the AHTCC and the ACTION Campaign.

Housing Credit Updates

Minimum 4 Percent Housing Credit Rate Enacted

A minimum 4 percent Housing Credit rate was enacted on December 27, 2020 as part of a year-end legislative package. The permanent minimum 4 percent Housing Credit rate is effective for (1) any building which receives an allocation of Housing Credit dollar amount after December 31, 2020, and (2) in the case of any building any portion of which is financed with an obligation described in section 42(h)(4)(A), any such building if any such obligation which so finances such building is issued after December 31, 2020. Though we and our partners had been urging that the minimum rate apply to any developments placed in service after January 20, 2020, it was determined that new tax policies in this package would generally only apply prospectively. See the bill text here and learn more about the year-end package here.

IRS Issues Guidance in Response to the COVID-19 Pandemic

On January 11, 2022, the Internal Revenue Service issued guidance (IRS Notice 2022-05) to extend key Housing Credit program deadlines and provide other flexibilities in light of continued barriers to the construction and operations of Housing Credit properties due to the COVID-19 pandemic. Many of these regulatory accommodations had previously expired, after they were initially provided in July 2020 (IRS Notice 2020-53) and further extended in January 2021 (IRS Notice 2021-12). The AHTCC submitted a letter to the IRS and Treasury Department in September 2021, urging for Housing Credit regulatory relief, and we have continued to push for these extensions along with the National Council of State Housing Agencies (NCSHA) and other partners. See our blog for more information and see a matrix developed by NCSHA comparing the newest guidance to previously enacted guidance and NCSHA’s guidance recommendations.

Learn more about Housing Credit IRS guidance in response to the COVID-19 pandemic in our Regulatory Issues Resource Center.

U.S. Department of Housing and Urban Development and Treasury Department Updates

HUD and Treasury Continue to Update COVID-19 Guidance

The Department of Housing and Urban Development (HUD) continues to periodically update its question and answer document for Office of Multifamily Housing stakeholders, including tenants, property owners, and lenders. The Treasury Department also released guidance on the requirements of the Emergency Rental Assistance (ERA) program to ensure funds are distributed quickly and efficiently to renters and helping Americans who are most in need of assistance, as well as guidance on guidance on the reallocation of ERA funds to program grantees. Additional multifamily resources and fact sheets can be found on the HUD website.

REAC Inspections Resume

The Real Estate Assessment Center (REAC) has resumed inspections of select HUD properties. The phased approach is further detailed in this memo and on the REAC website.

Federal Relief Provided in Response to the COVID-19 Crisis

  • Initial Emergency Funding Package: On March 6, 2020, President Trump approved an initial $8.3 billion emergency coronavirus package, providing funding for vaccine development and state and local health budgets.
  • Families First Coronavirus Response Act: Enacted on March 19, 2020, the second relief package (see summary, bill text) provided funding for free coronavirus testing, emergency paid sick leave, paid family medical leave, unemployment insurance, food assistance, and other health provisions.
  • Coronavirus Aid, Relief, and Economic Security (CARES) Act: Enacted on March 27, 2020, the third relief package provided $2 trillion to combat the spread of the virus, deepen the safety net for impacted households, and support impacted businesses. It included over $12 billion for HUD programs, a 60-day foreclosure moratorium on all federally-backed mortgage loans, up to 90 days forbearance for federally-backed multifamily mortgage loan payments, and a 120-day moratorium on eviction filings, which applies to Housing Credit properties. For additional information, see our blog post.
  • Paycheck Protection Program and Health Care Enhancement Act: Enacted on April 24, 2020, the interim emergency relief legislation (see Paycheck Protection Program increase summary, Health Care Enhancement summary, bill text), unofficially called “Phase 3.5”, provided an additional $310 billion for the Small Business Administration’s (SBA) Paycheck Protection Program and $50 billion for the SBA’s Economic Injury Disaster Loan program, both of which had previously run out of funds. It also provided $75 billion for hospitals, $25 billion for COVID-19 testing, and $10 billion for the SBA’s Economic Injury Grant program.
  • 2020 Year-End COVID-19 Relief and Omnibus Spending Bill: Enacted on December 27, 2020, the bipartisan 2020 year-end legislative package included a minimum 4 percent Housing Credit rate along with a disaster Housing Credit allocation, $25 billion in emergency rental assistance and other COVID-19 relief measures, Fiscal Year 2021 appropriations bills and additional tax provisions. For additional information, see our blog post.
  • American Rescue Plan: Enacted on March 11, 2021, the $1.9 trillion package provided over $40 billion for housing, as well as $1,400 stimulus checks, an extension of unemployment insurance, $350 billion in aid to state and local governments, $130 billion for schools, over $100 billion for health care, and expansions of the Child Tax Credit and Earned Income Tax Credit. For additional information, see our blog post.

Additional Resources

  • Center for Disease Control and Prevention COVID-19 website: Information specific to communities, workplaces, events, and homeless populations, as well as COVID-19 symptoms, testing, and prevention practices.
  • Housing Assistance Portal launched by the Consumer Finance Protection Bureau, Federal Housing Finance Agency, and US Department of Housing and Urban Development to provide COVID-19-related resources for renters and homeowners.