On December 27, President Trump signed a bipartisan year-end legislative package including 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 the Department of Housing and Urban Development (HUD), the bill provides $561 million above Fiscal Year 2020 enacted levels.
“The affordable housing provisions included in the year-end legislation are critical to support low-income families during the current crisis and as part of our nation’s recovery,” AHTCC Executive Director Emily Cadik said in Affordable Housing Finance. “The minimum 4 percent Housing Credit rate has been a key priority for the AHTCC, and we thank our champions in Congress for responding to this urgent need.” The minimum rate is expected to finance 130,000 additional affordable homes over ten years according to Novogradac and Co.
Learn more about the Housing Credit provisions and emergency rental assistance below. For additional details, see the press release from House Speaker Nancy Pelosi (D-CA), HUD appropriations summary (see page 45) and full bill text.
Housing Credit Provisions
The tax component of the package consists mainly of extensions of temporary tax provisions and COVID-19-related business relief, but few additional key provisions made it into the final deal, including a minimum 4 percent Housing Credit rate and a disaster Housing Credit allocation and additional flexibilities.
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.
The minimum 4 percent Housing Credit rate has long been a focus of the AHTCC’s advocacy. Along with our congressional champions, we thank all of our members and our partners in the affordable housing industry – especially the ACTION Campaign, Housing Advisory Group, and National Council of State Housing Agencies – for making this achievement possible.
Minimum 4 Percent Housing Credit Rate
The permanent minimum 4 percent Housing Credit rate is effective for buildings placed in service after December 31, 2020 and either (1) such building receives an allocation of Housing Credit dollar amount after December 31, 2020, or (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.
The so-called “4 percent” Housing Credit rate has fallen 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 when they are so critically needed. Hovering between 3.07 and 3.09 percent in recent months, the increase to 4 percent in 2021 would 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.
“With affordable housing already in short supply, today the pandemic has only increased this urgent need across the country. The 4 percent Housing Credit rate and rental assistance that will be provided will go a long way toward helping us develop, preserve and operate affordable housing, assisting low-income renters at a time when help is needed most,” said Michael Gaber, AHTCC Board President and Executive Vice President of WNC.
Disaster Housing Credit Allocation and Flexibilities
The legislation would provide disaster Housing Credit allocations for qualified disaster zones. See additional information below and legislative language here.
- Allocation and Flexibilities: For 2021, the allocation would be the lesser of $3.50 multiplied by the number of residents in qualified disaster zones or 65 percent of the state’s 2020 credit allocation, and unused credits may be carried over to 2022. Eligible buildings will also receive a one-year extension of the placed in service deadline and 10 percent test deadline for the disaster credits.
- Applicable Areas: Qualified disaster zones are those determined by the President, from January 1, 2020, to 60 days after enactment of the bill, to warrant individual or individual and public assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act due to disasters other than COVID-19. Novogradac and Co. has provided state-by-state disaster tax credit estimates for Alabama, California, Florida, Iowa, Louisiana, Michigan, Mississippi, Oregon, Puerto Rico, South Carolina, Tennessee and Utah.
COVID-19 Relief for Renters
The COVID-19 relief legislation includes important housing provisions to assist struggling renters:
- $25 billion for emergency rental assistance to be distributed by the Treasury Department to states based on population, with small states receiving a minimum of $200 million.
- Process: Funds will be administered by state and local grantees. Renters will apply and, upon qualifying, payments will be sent directly to landlords and/or utility service providers. If a landlord does not wish to participate, the grantee may provide funds directly to the eligible household. Landlords may apply for assistance on behalf of tenants, with a tenant’s consent.
- Use of Funds: No less than 90 percent of the funds can be used for payment of rent, rental arrears, utilities and home energy costs, utility and home energy arrears, and related housing expenses; and up to 10 percent of the funds will be available for housing stability services, such as case management and tenant-landlord mediation. Support can cover up to 12 months of assistance in 3-month increments, though an additional 3 months of assistance may be provided if it is needed for housing stability.
- Eligibility: Households are eligible if they earn 80 percent of area median income (AMI) or less, with priority for households making 50 percent of AMI or less or those who have been unemployed for at least 90 days. Households must be able to demonstrate a risk of homelessness or housing instability, and have one or more household members who qualifies for unemployment benefits or experienced financial hardship due to the pandemic. Grantees may also develop additional eligibility criteria.
- More Information: See a summary from House Financial Services Chairwoman Maxine Waters (D-CA) and the Financial Services Committee section by section summary.
- An extension of the current eviction moratorium through January 31, 2021.
- Additional relief for struggling low-income households, including:
- Economic Impact Payments of $600 for individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent;
- An additional $300 per week for workers receiving unemployment benefits through March 14, 2021, and an increase of the maximum number of weeks an individual may claim benefits to 50 weeks;
- An additional $13 billion to combat food insecurity, including a 15 percent increase for SNAP nutrition assistance and additional funding for food banks, senior nutrition programs, and school and day care feeding programs;
- $10 billion in emergency funds for the child care sector and $250 million for Head Start providers;
- $7 billion to expand broadband access, including $3.2 billion in emergency funds for low-income families to access broadband and the creation of a $1 billion tribal broadband fund, and
- Provisions to strengthen the Earned Income Tax Credit and Child Tax Credit for households who experienced lower wages in 2020 due to the pandemic.
The AHTCC applauds the assistance that will be provided to renters and struggling households, and will continue to support the provision of additional rental assistance as a critical part of our response to the pandemic. The National Council of State Housing Agencies estimates that renters will owe up to $34 billion in back rent by the end of 2020, putting more than 8 million households at risk of eviction, while other estimates show back-rent may reach $70 billion. According to the Census Bureau’s Household Pulse Survey, nearly 10.5 million renters were behind on rent when asked between November 25 and December 7.