Our nation was already facing an affordable rental housing crisis before COVID-19 brought on a new crisis far beyond what any of us have experienced or imagined. In the week before the pandemic took hold in the United States, we learned that 10.8 million households were paying more than half of their income on rent, according to the National Low Income Housing Coalition. Now, the COVID-19 crisis is accelerating the problem, and "stay-at-home" orders around the country are a somber reminder of just how essential it is to have a safe home.
In just the past month alone, 16 million people and counting are out of work, making affordable housing more critical than ever. And while the low-income housing tax credit is a proven solution that is primed to fill the affordable housing shortage, our ability to build and preserve these homes is also facing barriers brought on by the current crisis. Without legislative and regulatory intervention, many housing credit properties currently in service and in the construction and development pipeline face threats to their feasibility, limiting our ability to contribute to the economic recovery that will be needed.
The $12 billion in new Department of Housing and Urban Development appropriations included in the CARES relief bill signed in March was an important first step in providing emergency affordable housing funding, but much more is needed. That’s why the Affordable Housing Tax Credit Coalition and our partners in the ACTION Campaign are working to make sure that Congress provides more affordable housing relief, including a number of flexibilities specific to the housing credit.
Affordable housing developments already in the works are being hit by construction labor shortages and delays, supply chain disruptions, staffing and leasing issues, financing shortfalls, tenant safety issues, and other obstacles. A top priority is extending housing credit program deadlines, and we're calling on the IRS to take immediate action to provide flexibilities in response to the current national emergency. Fortunately there is precedent for providing these types of disaster-related measures, and while this disaster is totally unique, there is a strong case to be made for these flexibilities. In fact, extensions of some key deadlines—such as placement-in-service and the 10% test—are already allowable in nearly 50 states that have been declared disaster areas.
Another major obstacle is the financing issues that have arisen as a result of the crisis. The "4%" housing credit rate has fallen to a historically low 3.12% as a result of rock-bottom federal borrowing rates. The housing credit rate had already fallen low enough to render many critical developments infeasible before the crisis began, which is why setting the minimum 4% rate had already been such a high priority for advocates. Now, it's even more urgent. Congress first established a minimum 9% rate in the midst of the 2008 economic crisis, and it’s time to do the same for the 4%.
It's also harder to secure bond financing, which is why we're seeking to lower the "50% test." Currently, developments can only access the full amount of "4%" housing credits if half the project financing comes from bonds. But unexpected financing issues, as well as constrained bond volume cap in many states, are putting developments in jeopardy. By lowering the threshold, more properties will be able to access the credits they need.
We also need to stabilize existing affordable properties. Policies that were enacted to keep people in their homes during the crisis—like eviction moratoriums—will require counterbalancing measures to fund operating expenses, pay or resume paying debt service, and replenish operating reserves on affordable properties in the absence of cash flow from rent. That's why we're calling on Congress to allocate substantial additional funding to the HOME program to be used for rental assistance, operating expenses, and other emergency measures.
And then, as always, there is a need for more affordable housing, which we’ll require as part of any longer-term economic recovery. There was already strong support for increasing the housing credit allocation before the COVID-19 crisis, with more than half of the U.S. House of Representatives and over one-third of the Senate signed on to the Affordable Housing Credit Improvement Act, a bill that would expand the housing credit by 50%. In light of the millions of additional Americans now out of work, we will need to accelerate the nation’s ability to build and preserve affordable housing as this new crisis spurs an urgent need.
The affordable housing advocacy community is working with allies on Capitol Hill and in the administration to make the case for these policies, with the urgency that they deserve. And this is just the beginning—as this crisis unfolds, much more will likely be needed. We will be calling on many of you to join us in making the case for these and other policies, and sharing your stories of how this crisis is impacting residents and developments on the ground.
Our industry has weathered many crises before, and we are optimistic that by drawing on the experience and dedication of this community, we will emerge with a system that is even stronger than before and better positioned to serve the needs of American families who count on us for safe, affordable housing.