President Biden’s $6 trillion budget proposal seeks a new boost to the low-income housing tax credit (LIHTC) program, a major increase of Housing Choice Vouchers, and other significant investments in housing.
“With the FY22 budget, we are turning the page on decades of disinvestment and disregard for our nation’s housing crisis and putting housing where it belongs—at the center of our efforts to build a stronger, more equitable America,” said Marcia Fudge, secretary of the Department of Housing and Urban Development (HUD) in a statement. “The budget sends a clear signal that HUD is no longer going to be left on the sidelines while millions of Americans struggle with housing and remain shut out from the opportunities a good home provides.”
According to Fudge, the budget “transforms and empowers HUD to lay the foundation for stronger, more equitable housing infrastructure, to help communities thrive, and to give every person a fair shot to get ahead.”
When Congress begins writing its own spending bills, the president’s proposal will surely be altered; however, the plan provides a good look at the administration’s priorities and strategies. It lays out the key investments that Biden has proposed through the American Jobs Plan and the American Families Plan.
As part of the proposal, the Biden administration calls for an expansion of the LIHTC program.
The Green Book, the document that shares explanations of the budget plan, reveals the White House’s interest in creating an additional type of housing credit authority, referred to as “opportunity housing credit dollar amounts” (OHCDAs).
Housing credit agencies would have a separate ceiling for the OHCDAs from their existing allocation ceiling and would continue to receive annual infusions of regular HCDAs, according to the Green Book.
The agencies would be required to allocate the majority of their OHCDAs to projects in “Census Tracts of Opportunity.”
“In each calendar year 2022 through 2026, the aggregate number of new OHCDAs would be 118% of the aggregate annual number of new HCDAs under current law,” according to the Green Book. “These additional OHCDAs would be made available to all states on a per capita basis, but with a different per capita amount applied to each state.”
The per capita amount for a state would be determined by a formula established by the Treasury secretary in consultation with HUD that provides higher amounts to states with higher costs of constructing and operating affordable housing, as demonstrated by, for example, larger populations living in DDAs [difficult development areas] or higher percentages of rent-burdened households. Buildings in DDAs that receive allocations of either HCDAs or OHCDAs would receive basis boosts of up to 50%, says the book.
“This budget proposal, in terms of housing, is bigger than big,” says Bob Moss, a partner at MG Housing Strategies. “It really proposes to seriously chip away at the rental housing crisis. The Opportunity Housing Credit removes obstacles in high opportunity areas to increase their exposure to better jobs and transportation.”“Also, the proposed expansion of the HUD budget is the first major increase in over 30 years,” he says. “As you know the president proposes and Congress passes so we have our legislative work cut out for us. We also expect a large housing proposal from Senate Finance in June so there will be much to discuss.”
Moss notes that the Housing Advisory Group and the Affordable Housing Tax Credit Coalition is hosting a June 9 virtual legislative meeting to discuss the latest issues with members of Congress and the affordable housing industry.
Other Budget Proposals
Noting that there are no tax provisions that directly support building or renovating owner-occupied housing or that cover a development or financing gap, the administration is also proposing a new Neighborhood Homes Investment Tax Credit, which would support “new construction for sale, substantial rehabilitation for sale, and substantial rehabilitation for existing homeowners.” The constructed or rehabilitated residence must be a single-family home (including homes with up to four dwelling units), a condominium, or a residence in a housing cooperative.
The amount for 2022 would be $2 billion, and this amount would be indexed for inflation for the years 2023 to 2031.
The administration also is seeking to make the New Markets Tax Credit program permanent.
Permanent extension of the program would allow community development entities to continue to generate investments in low-income communities. This would create greater certainty for investment planning purposes.
The budget proposes to provide $30.4 billion for tenant-based rental assistance, expanding vital housing assistance to 200,000 more families, with a focus on those who are homeless or fleeing domestic violence. The budget proposal also calls for just over $14 billion for project-based rental assistance contracts, an increase of $595 million from fiscal 2021.
In addition, it calls for a $500 million increase for homeless assistance grants to $3.5 billion support more than 100,000 households—including survivors of domestic violence and homeless youth, helping prevent and reduce homelessness.
As announced earlier, the administration is seeking a $9 billion, or 15%, increase to HUD’s budget from fiscal 2021.
