The affordable housing industry received several key enhancements in the massive $787 billion economic stimulus package signed by President Barack Obama this week.
The new law provides $2.25 billion in gap funding to help stalled low-income housing tax credit (LIHTCs) projects. The funds will be distributed to housing tax credit allocating agencies based on the federal formula for the HOME program.
The bill also includes a provision to allow allocating agencies to use a portion of housing tax credits as grants instead of credits. States would be able to exchange 40 percent of their 2009 LIHTCs plus unused 2008 credit ceiling for grants at a reduced rate of $0.85 on the dollar.
Although a number of important programs were addressed in the package, there were also several notable omissions.
A proposal to allow investors to “accelerate” the housing tax credit by claiming 20 percent of the allowable credits in each of the first three years was not included in the final legislation. Many LIHTC program participants had lobbied for this provision, hoping it would be a way to encourage investors back into to the stagnant market. Funding for the National Housing Trust Fund was also left out.
“On the LIHTC side, what they did will be a good resource for deals that are already stalled,” said Judith Kennedy, president and CEO of the National Association of Affordable Housing Lenders. But, there wasn’t much in the bill to attract future private investment into the program, she said.
At first look, Kennedy said she was disappointed because the stimulus package didn’t do more to address housing, which is at the heart of the crisis. However, the administration’s later announcement of a $75 billion lifeline to people facing foreclosures was a good addition, she said.
Kennedy also cited several positives in the stimulus bill, including an additional $2 billion in Neighborhood Stabilization program funds and $3 billion for the New Markets Tax Credit program.
“By passing this legislation, Congress has acknowledged the need to restart stalled and stretched affordable housing development throughout the nation,” said Doris Koo, president and CEO of Enterprise Community Partners.
The enacted legislation includes an amendment to provide $2.25 billion to states through the HOME Investment Partnerships Program to help fill financing gaps in LIHTC developments. Such funding could immediately finance more than 14,000 apartment homes and nearly $2.5 billion of shovel-ready stalled developments.
Enterprise said it is disappointed that the approved legislation does not include a provision that would increase the carryback for the LIHTC, New Markets Tax Credit, and energy tax credit from one to five years for credits claimed in 2008 and 2009. The carryback provision would help keep existing investors in the LIHTC program and reassure new investors.
The legislation provides $4 billion for the public housing capital fund, with $3 billion being distributed by the capital fund formula and $1 billion through competitive grants. The bill also included $1.5 billion for homelessness prevention and rapid re-housing.
“It is terrific that long-standing problems with HUD [Department of Housing and Urban Development] programs, such as the backlog of public housing capital needs and short-term contracts for Sec. 8 property owners, were addressed in the stimulus bill,” said Sheila Crowley, president and CEO of the National Low Income Housing Coalition. “The $1.5 billion for emergency assistance to prevent homelessness will make a significant difference in the lives of hundreds of thousands of poor families. But ultimately the bill was a missed opportunity to effect real change in the affordable rental housing shortage by not funding the National Housing Trust Fund and new incremental vouchers. That is too bad.”
Sharon Price, director of policy for the National Housing Conference, also cited several positive aspects of the bill but noted that the important LIHTC program remains a concern.
"We are pleased that approximately $13 billion funding for housing programs and projects was included in the stimulus package, but in this economic climate with housing and job insecurity, money for housing programs is needed more than ever,” she said. “The inclusion of $2 billion for Neighborhood Stabilization funding is a positive step to help target communities that are being hit hard by foreclosures and vacancies and are ready and able to re-invent their communities. The inclusion of funding for $1.5 billion for homelessness prevention is also vital for families facing foreclosure or eviction due to their landlord's default. The LIHTC is at a total standstill right now, and while some funds were included for gap financing through the HOME program at HUD, not enough was done to unclog the pipeline of projects waiting to be completed."
Michael Rubinger, president and CEO of the Local Initiatives Support Corp., expressed optimism following the signing of the stimulus bill and unveiling of the administration’s foreclosure plan.
“The best news in this package is that we are finally tackling our housing problem straight on in a thoughtful, serious way,” he said in a written statement. “This is something we haven’t had thus far, a plan that goes to the root of the current economic crisis. Certainly, the president’s proposal cannot alone solve all the financial challenges that we face today. But, it is an important, positive step toward alleviating some of the debilitating pressure facing families and communities in this environment.”
Renee Rooker, president of the National Association of Housing and Redevelopment Officials (NAHR), also said the stimulus bill is an important step forward.
The $4 billion for the public housing capital fund “will allow public housing authorities to begin to mitigate the approximately $32 billion backlog in capital needs,” she said. “At the same time, we believe these funds will assist in furthering our efforts to integrate green building technologies and reduce energy consumption within our nation's public housing inventory.”
