Federal COVID-19 Response
and the Housing Credit

Legislative and Regulatory Proposals
for COVID-19 Relief and Recovery

Prior to the COVID-19 crisis, nearly 11 million renter households were spending more than half of their income on rent, and now millions more have lost their jobs or had their wages reduced due to the crisis. According to new estimates from the Terner Center, 16 million renter households are at immediate risk from these impacts, many of whom are likely to become housing cost burdened if they were not already. As the affordable housing shortage grows, the Low-Income Housing Tax Credit (Housing Credit) will be needed more than ever.

However, there are several barriers to maintaining and continuing to develop affordable housing that have been brought on by the COVID-19 crisis, including financing shortfalls, construction labor shortages and delays, broken supply chains, and other unforeseen obstacles, all of which put our affordable housing system at risk.

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

Enact a Minimum 4 Percent Housing Credit Rate

  • Enacting a minimum 4 percent Housing Credit rate would make critically needed affordable housing developments financially feasible in light of the drastically reduced Housing Credit rate, now at an historically low 3.07 percent for June as a result of cuts to federal borrowing rates as part of the crisis response. Because the rate has fallen so low, many critically needed developments – and the jobs that this construction would support – are at risk of not moving forward.
  • Setting the minimum rate is vital to the country’s affordable housing delivery system, as approximately half of all Housing Credit homes are provided through the 4 percent Housing Credit, and would provide more than 126,000 additional affordable homes over the next decade. Additionally, setting a minimum 4 percent rate would provide parity to the 9 percent Housing Credit rate, for which Congress first enacted a minimum rate in response to the 2008 economic crisis.
  • This change would apply for buildings placed in service after January 20, 2020 (the beginning of the COVID-19 “incident period” as determined by the Federal Emergency Management Administration).
  • See our resource for more information, and the ACTION Campaign letter to congressional leadership requesting this change. The AHTCC serves on the steering committee of the ACTION Campaign, which is a coalition of more than 2,300 organizations advocating for the Housing Credit.

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

  • Lowering the “50 Percent Test” to 25 percent would reduce the amount of limited Private Activity Bond financing required to access 4 percent Housing Credits, providing needed flexibility at a time when several issues are impacting the availability of bond financing, including delays and added costs due to the COVID-19 crisis. These unexpected and increased project costs are putting affordable housing at risk as the expected bond allocation for a development may no longer represent 50 percent of the total cost, substantially decreasing the 4 percent Housing Credit equity that is essential for the development’s financial feasibility.
  • Not only would this change increase the production of affordable multifamily housing, it would also free up Private Activity Bonds to be utilized for other state needs, such as single-family homeownership opportunities and infrastructure, which would be particularly helpful in the growing number of Private Activity Bond-constrained states.
  • This change would apply for Housing Credit properties financed using Multifamily Private Activity Bonds that are placed in service after January 20, 2020.
  • See the ACTION Campaign letter to congressional leadership requesting this change. The AHTCC serves on the steering committee of the ACTION Campaign, which is a coalition of more than 2,300 organizations advocating for the Housing Credit.

Allocate Additional Funding to Stabilize Existing Affordable Housing Properties

  • For many households whose incomes have been reduced or lost entirely due to the COVID-19 crisis, unemployment benefits will not be enough to pay the rent while also meeting other needs, like health care and food, and their financial burden may increase significantly after initial benefits expire. 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, will 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.

Regulatory Priorities for Immediate Relief 

Provide Regulatory Accommodations for the Housing Credit

  • Providing ten regulatory accommodations as requested by the National Council of State Housing Agencies (NCSHA), would help to ensure that Housing Credit financing for individual properties is not in jeopardy because of issues that have emerged from the COVID-19 crisis. Specifically, the Housing Credit is in need of deadline extensions, compliance and review moratoriums, a suspension of changes to compliance monitoring, and additional guidance on the treatment of property amenity closures due to social distancing policies. These accommodations would be provided by the Internal Revenue Service (IRS), which has regulatory jurisdiction over the Housing Credit.
  • The AHTCC and more than 220 other organizations signed onto a letter urging the Internal Revenue Service (IRS) to enact these accommodations.
  • NCSHA has developed a matrix comparing their requests with the existing IRS Revenue Procedures 2014-49 and 2014-50, which provide relief in instances of Presidentially-declared Major Disasters, and to recent IRS Notice 2020-23, which extends certain program deadlines until July 15, 2020.

Legislative Priorities for Long-Term Economic Recovery

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.

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.

Additional Information

Congressional Support

AHCIA Lead Sponsors Send Bipartisan Letter to Congressional Leaders

On April 16, Representatives Suzan DelBene (D-WA), Kenny Marchant (R-TX), Don Beyer (D-VA) and Jackie Walorski (R-IN), the lead sponsors of the Affordable Housing Credit Improvement Act, sent a letter to House Speaker Nancy Pelosi (D-CA) and Leader Kevin McCarthy (R-CA) urging the inclusion of crucial tax policies to support affordable housing as part of COVID-19 relief legislation. Specifically, the bipartisan letter calls on Congress to enact a minimum 4 percent Housing Credit rate and to allow more developments to more fully utilize the 4 percent Housing Credit by lowering the “50 percent test.” 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, 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, 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 one-year extensions to key Housing Credit deadlines and a minimum 4 percent Housing Credit rate, both of which were recommended by the AHTCC and the ACTION Campaign.

Housing Credit Updates

IRS Provides Short-term Deadline Extensions

The IRS has extended through July 15, 2020, a list of tax deadlines falling on or after April 1, 2020, and before July 15, 2020, including several relating to the Housing Credit and Multifamily Housing Bonds. For a full list of extended deadlines, please see the NCSHA’s post.

Major Disaster Declarations Provide Housing Credit Flexibility

States’ Major Disaster declarations provide an additional year for properties receiving carryover allocations to be placed in service, as well as up to six additional months for properties to meet the 10 percent test. For more information, see the Novogradac and Co. post, which also notes that these flexibilities are subject to change by future IRS guidance or enacted law, but are beginning to be utilized in response to the serious need for Housing Credit accommodations.

IRS Addresses Issues Related to Amending Tax Returns and Form 8609

The IRS released a new revenue procedure that allows once again the amending of Bipartisan Budget Act (BBA) partnership tax returns once Form 8609s are received for 2018 tax returns, as long as the partnership files an amended return by September 30, 2020. The new revenue procedure resolves for 2018 an issue impacting when Housing Credits could be claimed which, if not addressed, could have caused delays and impacted the amount of tax credit equity available for properties. Learn more about this issue on our blog. The revenue procedure also allows partnerships to utilize bonus depreciation changes in the Coronavirus Aid, Relief and Economic Security (CARES) Act, as explained by Novogradac & Co.

U.S. Department of Housing and Urban Development Updates

HUD Provides COVID-19 Guidance

On May 1, the Department of Housing and Urban Development (HUD) again updated its question and answer document for Office of Multifamily Housing stakeholders, including tenants, property owners, and lenders. The document includes information about Coronavirus Aid, Relief, and Economic Security (CARES) Act loan forbearance and eviction moratoriums, released in addition to April 10 guidance on the implementation of forbearance.  HUD is also posting recorded calls to explain COVID-19 guidance updates, and additional multifamily resources and fact sheets can be found on the HUD website.

REAC Inspections Suspended

The Real Estate Assessment Center (REAC), responsible for the inspection of HUD-assisted housing, is suspending inspections except where there is an exigent circumstance or threat to life or property. For more information, see the letter from HUD leadership.

Federal Housing Finance Agency Updates

Fannie Mae and Freddie Mac Eviction Moratorium and Mortgage Forbearance

On March 27, the CARES Act provided up to 90-day forbearance on mortgage loan payments for multifamily properties of 5+ units with federally backed loans if borrowers do not evict or charge late fees to tenants during the forbearance period, as well as a 120-day moratorium on eviction filings or other legal action to charge fees or penalties if a property is backed by Fannie Mae or Freddie Mac (or supported by HUD, the rural housing voucher program, or the Violence Against Women Act of 1994, which includes the Housing Credit). See which properties are backed by Fannie Mae or Freddie Mac, and for more information on the CARES Act, see our blog. Days prior, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac would provide mortgage forbearance for multifamily property owners that suspend all evictions of residents unable to pay rent due to the COVID-19 crisis. See more about FHFA’s COVID-19 response here.

Federal Relief Packages in Response to the COVID-19 Crisis

  • Initial Emergency Funding Package: On March 6, 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, 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, the third relief package (see section-by-section summary, bill text, FAQ document), 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 Department of Housing and Urban Development (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, the interim emergency relief legislation (see Paycheck Protection Program increase summary, Health Care Enhancement summary, bill text), unofficially called “Phase 3.5”, provides 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. Additionally, it provides $75 billion for hospitals, $25 billion for COVID-19 testing, and $10 billion for the SBA’s Economic Injury Grant program.

Additional COVID-19 Response Resources