Legislation has been introduced to make American Rescue Plan funds more compatible for affordable housing developments receiving low-income housing tax credits (LIHTCs).
Reps. Alma Adams (D-N.C.) and David Rouzer (R-N.C.) recently announced the LIHTC Financing Enabling Long-Term Investment in Neighborhood Excellence Act or Lifeline Act.
“Over 20 states have declared their intention to use money from the American Rescue Plan to ensure that the pipeline of affordable housing units will remain robust,” said Adams. “Our legislation removes the statutory barriers in place so that cities, counties, and states can use their State and Local Fiscal Recovery Fund (SLFRF) dollars to support affordable housing developments.”
The introduction of H.R. 7078 comes after the Treasury Department issued a final rule pertaining to the SLFRF, which was created by the American Rescue Plan Act of 2021. Per that rule, SLFRF dollars must be obligated by Dec. 31, 2024, and expended by December 31, 2026.
At a time when development costs have been sharply rising, nearly two dozen states have declared their intention to use SLFRF dollars to offset those costs and ensure that the pipeline of affordable housing units will remain robust. However, Treasury’s final rule has presented an immediate and insurmountable barrier for states and localities wishing to do so. Because funds must be expended by 2026, states cannot continue to make LIHTC payments for the duration of previously negotiated contracts; nor can these funds be given immediately as grants without reducing the cost basis for developers and disincentivizing construction, said officials.
The Lifeline Act, which was drafted in consultation with the Treasury Department and housing stakeholders, “would provide the legislative solution required by deeming SLFRF dollars put toward housing credit development as considered expended in compliance with statutory requirements,” said the representatives.
Specifically, the bill would allow state and local governments to use the recovery funds to make long-term loans to LIHTC projects.
Sen. Patrick Leahy (D-Vt.) is expected to introduce companion legislation in the Senate.
