Editor's note: This story was updated Sept. 28, 2016.

Sen. Ron Wyden (D-Ore.) has introduced legislation that would create a middle-income housing tax credit (MIHTC).

Sen. Ron Wyden
Sen. Ron Wyden

Building on the success of the long-standing low-income housing tax credit (LIHTC), the new credit would create rental homes for families with incomes between 60% and 100% of the area median gross income (AMGI). This is a population that is still in need of affordable housing but does not qualify for housing under the LIHTC program, which caps incomes at 60%.

“In my state and nationwide, affordable housing is key to climbing the ladder of economic mobility,” Wyden said in a statement. “The bottom line: America’s housing policy needs a remodel. It should start by using proven tools to develop new homes for Americans earning low and moderate incomes. This new tax credit will work hand in hand with the tax credit for low-income housing, which has been a huge success for decades.”

Like the LIHTC model, the federal government would allocate credits to states based on population. For 2017, the allocation would be $1 per capita with a $1.14 million small state minimum. Housing authorities would then follow a competitive process to allocate the tax credits to developers for individual projects, either new construction or rehabilitations, according to Wyden, Senate Finance Committee ranking member.

In order to help guarantee that the MIHTC program does not detract from investment in low-income housing, a state’s unused MIHTC dollars would be returned to the existing pool of funding for LIHTC.

"Sen. Wyden has taken another step to provide resources for a sector of the housing market that is desperate for affordable housing," says David Gasson, executive director of the Housing Advisory Group and vice president of Boston Capital. "The MIHTC would spur economic development by building and rehabilitating housing for the workforce that is growing the economy and is the backbone of communities across the country. By structuring the MIHTC so that it can both work with and potentially augment the LIHTC, Sen. Wyden has made a statement that housing for low- and moderate-income individuals and families must be a priority and is a driver of the nation’s economy."

Under the proposal, the tax credits would be provided to developers over a 15-year compliance period. The affordability restrictions would remain in place for up to an additional 15 years after the compliance period. The credit amount would equal 50% of the present value of the qualifying costs, or 5% a year on an undiscounted basis.

To qualify for MIHTCs, at least 60% of a development's units must be rented to individuals with incomes less than or equal to 100% of the area median gross income. Projects that receive federal assistance, including grants, credit assistance, or tax-exempt bonds, are not eligible for MIHTCs. A project’s middle-income units must also set affordable rents that do not exceed 30% of the income of the middle-income tenants. This rental rate includes a utility allowance and household calculation, based on the number of bedrooms in the unit.

Not everyone supports the MIHTC. The National Low Income Housing Coalition (NLIHC) opposes the bill, saying that while 60% of the units would be targeted to households earning median income, the remaining 40% would have no income targeting at all.

“Given the growing affordable housing crisis, bold action is needed to serve more families in need. New federal resources must be targeted to serve those with the clearest and greatest needs—families with extremely low incomes," said Diane Yentel, NLIHC president and CEO, in a statement. "If enacted, Sen. Wyden's bill would divert much-needed resources to higher-income households who, the data show, do not face significant housing challenges. Just 2% of middle-income renters nationwide are severely cost burdened, compared with 75% of the poorest renters paying more than half their income towards their rent.”

Wyden has described his proposal as a "discussion draft" and said it is being circulated the proposal to stakeholders, members of Congress, federal officials, and others for review and comment. The responses will be reviewed and, if appropriate, incorporated into legislation. Comments on the proposal can be submitted to MIHTC@finance.senate.gov.

However, MHITC legislation (S. 3384) was introduced Sept. 22, according to Congress.gov.

A one-page summary of the legislative proposal can be found here. A longer, section-by-section summary can be found here and legislative text can be found here.