Legislation to establish a permanent minimum rate for the low-income housing tax credit (LIHTC) was announced by Reps. Pat Tiberi (R-Ohio) and Richard Neal (D-Mass.) at the end of February.
“I’ve seen first-hand the benefits of the low-income housing tax credit during my visits to low-income housing developments in my district,” Tiberi said in a statement.. “It’s an effective, successful program, and by making a permanent floor on the credit rate, we’re creating certainty for developers to create construction and renovation jobs while increasing housing availability for more low-income families, veterans, seniors, and individuals living with disabilities.”
The Tiberi-Neal bill would permanently establish fixed 9% (for new rental construction property) and 4% (for existing property) rates. The bill would apply to buildings placed in service after Dec. 31, 2014.
Fixing the rate may seem like a small change, but it has a big impact.
In 2008, the Housing and Economic Recovery Act created a temporary 9% floor for projects, allowing developers to receive additional credits during the economic downturn. However, the fixed rate has since expired, so the LIHTC industry has had to go back to using a floating rate that’s been about 7.5%. At the lower rate, a project may receive as much as 20 percent less equity.
Tiberi said more than 350 national, state, and local organizations— from investors to developers to affordable housing advocates—strongly support this legislation, including the Affordable Housing Tax Credit Coalition and the National Council of State Housing Agencies.
"Today's reintroduction of the fixed-rate bill for the housing credit is welcome but not unexpected news,” said Bob Moss, principal and national director of governmental affairs at CohnReznick. “Rep. Tiberi continues to be a huge champion in the House, and we are extremely happy that he has the support of the committee and leadership. The industry looks forward to the introduction of the companion bill in the Senate from Sens. (Maria) Cantwell and (Pat) Roberts in weeks to come. From there we will continue to look for a tax vehicle in 2015."
Tiberi and Neal both serve on the influential tax-writing House Ways and Means Committee.
Connect with Donna Kimura, deputy editor of Affordable Housing Finance, on Twitter @DKimura_AHF.
