The AHTCC applauds the inclusion of provisions to expand and strengthen the Low-Income Housing Tax Credit (Housing Credit) in the Moving Forward Act, which passed the House of Representatives today by a vote of 233 – 188.
The Moving Forward Act would provide:
- A minimum 4 percent Housing Credit rate,
- A 9 percent Housing Credit allocation increase of more than 50 percent,
- A reduction of the “50 percent test” bond-financing threshold to 25 percent,
- Targeted basis boosts to facilitate developments providing homes to hard-to-reach communities and populations,
- An election to address “adjuster” issues through an accelerated first- or second-year credit,
- A provision to help address NIMBYism, and
- A Private Activity Bond allocation increase of nearly 10 percent.
See below for the full list of Housing Credit-related provisions and additional affordable housing-related provisions. For additional information about the Moving Forward Act, see the outline, section-by-section, and bill text, and revenue estimates recently released by the Joint Committee on Taxation.
These provisions were also included in standalone Senate legislation by Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Senator Maria Cantwell (D-WA). Though this package is not expected to be considered by the Senate as is, having this support for the Housing Credit and affordable housing generally sets an important precedent for future infrastructure legislation, and could serve as potential proposals to include in future COVID-19 response legislation.
“To make sure that the COVID crisis does not reduce the supply of low-income housing,” House Ways and Means Chairman Richie Neal (D-MA) said in a statement, “We’re making significant investments in the Low-Income Housing Tax Credit, not the least of which is a 50% increase in state allocations, in addition to other programs to rehabilitate old housing stock.”
Amendments to the Moving Forward Act
We previously reported on the Housing Credit provisions in the Moving Forward Act when the original bill text was released last week, and since then several amendments were added with few relating to the Housing Credit.
Included in today’s passage of the Moving Forward Act were technical changes to two Housing Credit provisions, on which the AHTCC and our partners advised:
- The minimum 4 percent rate will now apply to properties placed in service after January 20, 2020, rather than those that receive a determination of Housing Credits after December 31, 2019.
- The reduction of the “50 percent test” will apply to properties financed by an obligation issued in calendar years beginning after December 31, 2019, rather than those placed in service in taxable years after December 31, 2019.
Additionally, the originally drafted 30 percent increase in Private Activity Bond allocation was revised to a 10 percent increase. Specifically, the allocation was revised from $135 per capita to $115 per capita and, for the small state minimum, from $402,220,000 to $353,775,000. The provision still provides an increase of nearly 10 percent over current levels.
An amendment was included that would apply Davis-Bacon Act prevailing wage requirements with respect to certain exempt facility bonds, but would not apply to the Housing Credit or Housing Bonds.
All Housing Credit Provisions
The legislation includes the following proposals on the Low-Income Housing Tax Credit from the bipartisan Affordable Housing Credit Improvement Act (AHCIA/S. 1703/H.R. 3077):
- Enact a permanent minimum 4 percent Housing Credit rate, which is estimated to finance an additional 126,000 affordable homes over the next decade, according to Novogradac & Co. The rate would apply to properties that are placed in service after January 20, 2020.
- Increase the annual Housing Credit allocation from $2.81 per capita to $4.56 per capita, and from $3,217,500 to $5,214,051 for the small state minimum, an increase of more than 60% over current levels. The phase-in would be accelerated over two years instead of the five initially proposed in the AHCIA.
- Provide basis boosts to facilitate developments providing homes to hard-to-reach communities and populations:
- A 50 percent basis boost for developments serving extremely low-income tenants in at least 20 percent of units, along with a 10 percent increase in Housing Credit allocations on top of the increase already proposed, to be used specifically for these developments,
- A 30 percent basis boost for properties in rural areas through designation as Difficult to Develop Areas,
- A 30 percent basis boost for properties in Native American areas through designation as Difficult to Develop Areas, and
- The ability for the state housing agency to provide a 30 percent basis boost as needed for properties financed by Housing Bonds by treating such properties as located within Difficult to Develop Areas.
- A prohibition on local approval and contribution requirements to help address NIMBY issues.
The legislation also includes several provisions that the AHTCC and our partners had proposed as part of the COVID-19 response:
- Lower the “50 percent test” threshold of Housing Bond financing required to access 4 percent Housing Credits to 25 percent, which could provide as many as 1.4 million affordable homes over the next decade. The provision would apply to properties financed by an obligation issued in calendar years beginning after December 31, 2019.
- Extend two key Housing Credit deadlines:
- A 12-month extension of the 10 percent test, so that at least 10 percent of the anticipated basis of a development can be expended within two years of the Housing Credit allocation instead of one, and
- A 12-month extension of the rehabilitation expenditure deadline, from 24 to 36 months.
- Note that the IRS today released guidance that included an extension of the 10 percent test and the rehabilitation expenditure deadline through December 31, 2020. For more information, see our blog.
- Address “adjuster” issues that have arisen from the COVID-19 crisis by temporarily allowing owners to elect to receive 150 percent of the Housing Credits otherwise allowable for a building in a project’s first or second tax credit year, reducing the credit for the subsequent years on a pro-rata basis. This would help to cover financing gaps brought about by significant financial penalties, known as “adjusters,” caused by the delays resulting from the COVID-19 crisis. The proposal would apply to buildings for which the first-year credit period ends after July 1, 2020, and before July 1, 2022, which also have construction or leasing delays occurring after January 31, 2020, due to COVID-19.
The legislation also includes two other Housing Credit provisions:
- A new 25 percent low-income housing supportive services credit to cover a portion of costs for providing certain resident services at Housing Credit properties.
- Curtail the use of Qualified Contracts by repealing the option going forward and changing the formula that determines purchase price on existing properties. This proposal is based on the Save Affordable Housing Act of 2019 (S. 1956/H.R. 3479).
Private Activity Bond Provision
- Increase the ceiling on private activity bond volume cap for each state from $105 per capita to $115, and for the small-state minimum from $321,775,000 to $353,775,000, an increase of nearly 10 percent that would allow states to increase issuance of multifamily Housing Bonds.
Other Affordable Housing Provisions
- Establish a new Neighborhood Homes Investment Act tax credit to incentivize the rehabilitation of vacant homes and construction of new homes in distressed communities.
- Authorize over $100 billion to facilitate the development and preservation of 1.8 million more affordable homes, including:
- $70 billion for the Public Housing Capital Fund,
- $10 billion for Community Development Block Grants (CDBG),
- $5 billion for the HOME Investment Partnerships Program, for which the AHTCC and our partners have advocated as part of the COVID-19 response, and
- $5 billion for the Housing Trust Fund.
Note that the House-passed HEROES Act already provided $100 billion for a new Emergency Rental Assistance program, based off of the Emergency Solutions Grant framework, and authorized substantial additional housing appropriations to other HUD programs, to assist renters who are unable to attain or maintain housing stability during the crisis.