As affordable housing moves further out of reach for millions of working families, Sen. Maria Cantwell (D-Wash.) has called for a 50% expansion of the low-income housing tax credit (LIHTC) program.
The bold proposal would create or preserve approximately 400,000 additional affordable housing units over the next decade.
“We’re here today to launch a national campaign to say that we need to increase the amount of tax credits so more affordable housing units can be built in the United States of America,” Cantwell said on Thursday. “We know this is a big challenge, but the housing crisis is a big challenge.
It would be one of the most significant updates to the LIHTC program in its 30-year history.
Cantwell announced her national campaign at the Patrick Place Apartments in Seattle, which provides affordable housing and supportive services for low-income and homeless individuals. The development by Catholic Housing Services of Western Washington was built with the help of more than $7 million through LIHTCs.
“We stand here in this beautiful building called Patrick Place and ask 'why not?'” she said. “Why not show that a partnership between federal, state, local government, nonprofit organizations, and the private sector can provide homes for people who were formerly homeless.”
Cantwell stressed that the campaign isn't ending in Seattle. “We are going over to Spokane and on to Tacoma, and then we’re going to other cities across the nation to take this message to the American people,” she said. “We need more affordable housing, and we need it now. So please tell your friends and neighbors to join the A.C.T.I.O.N. Campaign, and let’s make this story a reality all across America.”
In addition to increasing the LIHTC allocation authority, Cantwell said she will seek program reforms to better target the lowest-income population. This includes changes to income-limitation formulas to promote greater income mixing, allowing developments to maintain financial feasibility, while providing a deeper level of affordability.
Cantwell also plans to propose that housing credit allocating agencies be allowed to provide up to a 50% basis boost for properties targeting extremely low-income or homeless families and individuals, allowing these projects to achieve greater financial feasibility and eliminate the need for debt financing.
She was joined by members of the A.C.T.IO.N. Campaign, which is co-chaired by Enterprise Community Partners and the National Council of State Housing Agencies. The campaign has recently brought together 1,300 organizations and businesses to support raising the cap on LIHTC allocation authority by at least 50%.
Industry leaders praised Cantwell’s efforts to bolster the housing credit, which is widely considered the most successful federal program for the production and preservation of affordable housing.
“I strongly feel that the proposed legislation is the recognition of the rental housing crisis we face in virtually every county in this country by Sen. Cantwell,” said Bob Moss, principal and national director of governmental affairs at CohnReznick. “She is truly our Senate champion and advocate in Congress.”
Last December, Cantwell championed the LIHTC and secured an important fix to the program by permanently extending the credit rates to 9% of eligible costs on new construction. This ended an era when variable rates made financing of affordable housing less predictable.
“Sen. Cantwell’s leadership on housing issues has been second to none and instrumental in securing resources for much need affordable housing across the country,” said David Gasson, executive director of the Housing Advisory Group and vice president at Boston Capital. “With more than 11 million families, veterans, and seniors seeking quality affordable housing, this effort to secure additional funding is not only necessary but a moral imperative that must be taken serious by legislative leaders and their colleagues in Washington.”
Many are confident that the LIHTC industry can absorb a 50% increase. In many states, developer demand for credits is two or three times the available supply. For example, the Iowa Finance Authority recently awarded about $6.8 million in credits to 11 developments in its 2016 allocation round. It received applications for 31 developments seeking more than $19.2 million. The agency had about $7.8 million available and will use the remaining credits to assist current LIHTC projects that are under construction or have incurred cost increases.
The other key piece is investor appetite for housing credits, and that’s been very strong as banks and other investors vie to acquire LIHTCs.
In 2013, the Bipartisan Policy Center’s Housing Commission recommended a 50% increase in LIHTCs, saying “an increase in the credits available would provide an opportunity to refine the targeting of credits to ensure the program is meeting the most critical rental housing needs.”
Earlier in the day, Cantwell released, Addressing the Challenges of Affordable Housing & Homelessness: The Housing Tax Credit, which reports that 11 million renter households across the country, or one in four renters, spend more than half of the monthly income on rent. The new report adds that the housing credit has been responsible for financing the development of nearly 2.9 million rental homes. Between 1986 and 2013, more than 13.3 million people have lived in homes that were financed by the LIHTC.
The need for affordable housing was also underscored in another new report.
On the same day that Cantwell announced her plan, the National Low Income Housing Coalition (NLIHC) reported that there is a shortage of 7.2 million affordable and available rental units for America’s 10.4 million extremely low-income (ELI) renter households, those in the bottom 30% of income in their communities.
There are only 31 affordable and available rental units for every 100 ELI households, according to NLIHC’s new report, The Gap: The Affordable Housing Gap Analysis 2016.