Affordable housing advocates are exploring different options to move forward key provisions of the stalled Build Back Better (BBB) bill.
Hopes of passing the sweeping $2 trillion proposal faded late last year when Sen. Joe Manchin (D-W.Va.) said he would not support the bill, which included increases to the annual 9% low-income housing tax credit (LIHTC) allocation, a reduction of the 50% bond financing threshold test to 25%, and other significant changes. In an evenly split Senate, Manchin’s vote likely determines the bill’s fate.
“Build Back Better is on life support,” says industry veteran Bob Moss. “It’s not being played out in the public eye. I think that’s intentional on part of the administration and lawmakers.”
Advocates point out that Capitol Hill staffers remain optimistic that the bill can win congressional approval, but the timing is unknown. In early January, lawmakers had turned their focus to voting rights and other issues.
BBB has never had a target date, says Moss, but there are other approaching deadlines—Feb. 18 when the continuing resolution expires and March 1 when President Biden gives his State of the Union address—that are significant for Congress and the administration to act on key goals.
Moss and David Gasson are partners in MG Housing Strategies, a boutique advocacy shop focused on housing.
One of the big concerns is the reduction in the LIHTC allocation cap, which has fallen to $2.60 per capita this year now that a 12.5% cap increase has expired after being in place for four years, says Gasson.
The drop in allocations means fewer affordable housing developments will be financed this year, especially with projects facing rising construction and labor costs. BBB calls for increasing the annual LIHTC cap for several more years along with other program improvements.
While it’s disappointing that the legislation hasn’t passed, there are still opportunities to expand affordable housing resources this year, according to Gasson.
In January, Democrats and Republicans restarted negotiations on the fiscal 2022 federal budget with the understanding that the continuing resolution expires the following month, says Gasson.
Both sides have priorities they would like to see in the budget, which could mean an omnibus package that includes tax extenders or a separate tax package.
“We would absolutely work to include the 12.5% LIHTC increase that expired last year,” Gasson says.
If it’s a tax package, the industry could look at potentially including other provisions that are in BBB and maybe even a little more, such as a basis boost for bond deals or parts of the Affordable Housing Credit Improvement Act and the Decent, Affordable, Safe Housing for All Act, he says. This would be a bipartisan process so the support for the LIHTC on both sides of the aisle could benefit this effort.
Beyond Build Back Better, there are several other important issues in 2022.
Other priorities include working with the White House, the Domestic Policy Council, the Commerce Department, and other groups to stem the rising cost of lumber and other materials.
“That’s a clear threat and stretches resources,” Moss says. As a result, advocates are engaging with White House representatives to explain how lumber costs are affecting construction and rehabilitation projects.Officials are also hopeful that the Internal Revenue Service will soon issue regulations for the average income test for LIHTC developments using the average income option.
Public Housing Priorities
The Council of Large Public Housing Authorities (CLPHA) also is continuing to advocate for the housing investments in BBB. “The need has not changed,” says CLPHA executive director Sunia Zaterman. “The question is how do we best advance funding increases to housing this year. Whether it is through Build Back Better or the appropriations process, our goal is to keep housing issues at the forefront.”
The legislation includes $65 billion to address the nation’s deteriorating public housing as well as $25 billion to expand housing vouchers to approximately 300,000 households.
“Recapitalizing the public housing portfolio and an expansion of the voucher program have been our consistent and long-term priorities,” Zaterman says.
CLPHA is also closely watching the fiscal 2022 budget appropriations. Both the House and Senate have proposed significant increases to the Department of Housing and Urban Development (HUD) budget. Zaterman notes that the House Appropriations bill calls for expanding rental assistance to 125,000 additional households.
Another focus is the continued implementation of emergency housing vouchers funded by the American Rescue Plan Act of 2021. Through the emergency housing voucher program, HUD is providing 70,000 vouchers to public housing authorities to assist individuals and families who are homeless, at risk of homelessness, or fleeing domestic violence and other situations. Virtually all of CLPHA members have received an allocation of the vouchers.
“What the emergency housing voucher program is teaching us is that high-risk and high-need households are going to need connections to ongoing services,” Zaterman says. “We need to continue to build that infrastructure.”
California Budget Proposal
California. Gov. Gavin Newsom has made headlines with his recent 2022-23 budget proposal that includes billions of dollars to address homelessness. Newsom, who has made homelessness one of his central issues, is calling for spending $2 billion more on the issue on top of the $12 billion multiyear commitment in last year’s budget.
The focus will be on people with mental health issues and the cleanup of encampments.
The state will be investing in 55,000 new homes and treatment beds to tackle the problem, according to Newsom.
The budget proposal also calls for $500 million over two years to support the Infill Infrastructure Grant program, $300 million over two years for the Affordable Housing and Sustainable Communities program, and $100 million over two years to expand affordable housing development and adaptive-reuse opportunities on state land sites. The budget also proposes $200 million over two years for the California Housing Finance Agency to provide loans to developers for mixed-income rental housing, specifically for households earning between 30% and 120% of the AMI.
