Lowering the “50% test” for tax-exempt bond-financed affordable housing developments would result in the creation or preservation of as many as 1.4 million homes over the next decade, according to an analysis by Novogradac.

“The projected number of additional affordable rental homes created or preserved between 2021 and 2030 in that scenario varies from 177,665 to 1,421,320, depending on the new threshold level, whether all additional PAB [private-activity bond] cap would be devoted to affordable housing, and the extent to which gap financing is scalable. Under every scenario, though, decreasing the current law 50% threshold would create or preserve a significant number of new affordable homes,” says the report commissioned by the National Council of State Housing Agencies.

Under existing law, if 50% or more of a property’s aggregate basis of land and building is financed with tax-exempt bonds, the building is generally eligible for 4% low-income housing tax credits.

The analysis by Novogradac, an accounting and professional services organization, comes at a time when the demand for PABs to finance affordable housing is outpacing the supply in many states. To help ease the crunch and meet the demand, one idea has been to reduce the 50% test to help spread the bonds and 4% housing credits to more projects.

Read “Analyzing the Impact of Lowering the 50% Test for 4% Tax-Exempt Bond Financed Properties” to learn more.