Today the White House released a Housing Supply Action Plan to “ease the burden of housing costs over time, by boosting the supply of quality housing in every community” to “help close America’s housing supply shortfall in 5 years, starting with the creation and preservation of hundreds of thousands of affordable housing units in the next three years.”
The Administration’s plan calls on Congress to pass legislation to finance “more than 800,000 affordable rental units by expanding and strengthening the Low-Income Housing Tax Credit.” Specifically, the plan urges for passage of the Housing Credit provisions in the House-passed reconciliation bill and the additional Housing Credit proposal from the Biden Administration’s fiscal year 2023 budget proposal, both of which are described as “critical enhancements.” The plan also notes the “longstanding bipartisan support for LIHTC.”
Housing Supply Action Plan: Housing Credit Legislative Proposals
The House-passed reconciliation bill includes the following Housing Credit priorities to increase affordable housing production by more than 800,000 units, according to Novogradac:
- Lowering the bond-financing threshold from 50 percent to 25 percent for five years, from 2022 to 2026,
- Increasing the annual Housing Credit allocation at a rate of 10 percent per year plus inflation from 2022 to 2024, which amounts to a roughly 41 percent increase over current levels in 2024, followed by inflation adjustments after 2025,
- Providing a permanent 50 percent basis boost for properties serving extremely low-income (ELI) households, along with an 8 percent set-aside for properties taking advantage of the ELI basis boost, as well as a limitation on the amount of allocation and volume cap that can be used for properties receiving the ELI boost, and
- Providing a permanent 30 percent basis boost for properties in Indian areas.
The President’s FY 2023 budget proposal included an additional $10 billion investment in the Housing Credit through a discretionary basis boost for bond-financed properties. This basis boost would mirror the boost already available for 9 percent Housing Credits, but would only apply in the case of bond-financed new construction or substantial rehabilitation that adds new net units.
Housing Supply Action Plan: Housing Credit Regulatory Proposals
The Housing Supply Action Plan includes the following regulatory proposals related to the Housing Credit:
- Finalizing the LIHTC “Income Averaging” proposed rule, which the plan states Treasury will finalize “by the end of September.” See the recommendations from the AHTCC and our partners in a letter to Treasury regarding the final income averaging regulations.
- Increasing Fannie Mae and Freddie Mac Housing Credit investment, stating, “Last September, Fannie Mae and Freddie Mac also increased their equity investment in LIHTC deals, resulting in investments in over 7,000 units. The Enterprises anticipate further growing their LIHTC equity investments in the year ahead.”
- Harmonizing “federal requirements across programs – including through programs like HUD’s LIHTC Pilot Program, which streamlines FHA processing of mortgage insurance applications for projects with LIHTC equity.” The Action Plan states these changes will “reduce transaction costs and duplication, [and] speed development.”
The Housing Supply Action Plan also calls on Congress to “bolster funding for successful housing subsidy programs that can pair with LIHTC to produce and preserve housing that is affordable for very- and extremely-low-income renters. These programs include the Housing Trust Fund, the HOME Program, Housing Choice Vouchers and the Project Based Rental Assistance program.” It is notable that these programs are discussed in relation to their pairing with the Housing Credit, recognizing its foundational role.
Housing Supply Action Plan: Additional Housing Proposals
The plan also calls for numerous other legislative and regulatory investments and reforms in other housing programs, including:
- Creating the Neighborhood Homes Tax Credit
- Leveraging American Rescue Plan funds for investments in affordable housing (read more about the legislative fix proposed in recently introduced legislation to address the incompatibility of these funds with Housing Credit properties)
- Providing Housing Supply Fund financing for affordable housing production to develop housing for low- and moderate-income renters and homebuyers
- Partnering with the private sector to address supply chain disruptions for building materials
- Strengthening Enterprise financing for multifamily development and rehabilitation, including by considering purchasing Construction to Permanent multifamily loans
- Advancing HUD’s HOME Investment Partnerships Program as a key tool for the production and preservation of affordable rental housing and promotion of homeownership
- Supporting new and existing affordable housing in Indian Country, and preserving more than 10,000 HUD-assisted multifamily rental housing units in urban and rural America
- Rewarding jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes
- Deploying new financing mechanisms to build and preserve more housing where financing gaps currently exist, including manufactured housing, accessory dwelling units (ADUs), 2-4 unit properties, and smaller multifamily buildings
The Path Forward
In conjunction with the rollout of the Action Plan, Brian Deese, director of the White House National Economic Council, and Suzanne Clark, President and CEO of the U.S. Chamber of Commerce, placed an op-ed promoting several of the policies from the Housing Supply Action Plan in the Wall Street Journal, “America Needs More Houses.”
The op-ed explains, “while the two of us don’t agree on every issue, we agree that the shortfall is longstanding and must be addressed. The good news is that there are proven ways that the administration, Congress, state and local governments, and the private sector can work together to build and preserve enough homes to end the housing shortfall in America. ” One of their three proposed solutions is: “Make it easier for developers to finance new housing, especially housing that is affordable to low- and middle-income families. To start, Democrats and Republicans in Congress have supported the creation and expansion of federal tax credits—like the low-income housing tax credit and the neighborhood homes tax credit—which are projected to enable the construction or rehabilitation of nearly one million affordable homes. Congress should enact and expand these credits without delay.”
Many of the regulatory proposals in the plan, like the finalization of income averaging regulations, can be completed independently without the approval of Congress. However, the call for new resources to be provided through legislative action comes at a time when the window is narrowing to pass any Democratic-only priorities through the reconciliation process. Additionally, there may be few opportunities to pass bipartisan legislation before the midterm elections, though the support for affordable housing and the Housing Credit, especially in the context of bringing down costs for Americans, helps to position Housing Credit production proposals for any legislation that does come together over the coming months.
The AHTCC will continue to work with the Administration and Congress to emphasize the importance of expanding and strengthening the Housing Credit through legislative and regulatory action.
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