It’s been a wild ride for the affordable housing industry over the past several months. The Tax Cuts and Jobs Act retained the low-income housing tax credit (LIHTC) and private-activity bonds, but a lower corporate rate and other provisions are projected to significantly reduce affordable housing production.
Then in March, Congress passed an omnibus spending bill that included the first expansion of the LIHTC program in over a decade, increasing the housing tax credit by 12.5% over the next four years and including income-averaging indefinitely to allow for the 60% area median income ceiling to apply to the average of LIHTC units in a development.
The Department of Housing and Urban Development (HUD) also saw a 10% boost over fiscal 2017 funding and good policy initiatives, such as the Rental Assistance Demonstration cap being expanded to Sec. 202 properties with Project Rental Assistance Contracts to preserve elderly housing as well as the extension of the Family Self-Sufficiency Program.
Much of the success on the federal level can be attributed to the industry’s strong advocacy efforts for housing programs over the past several years and the congressional stalwarts who believe in the LIHTC and other housing programs.
“It was really a testament to everyone in this industry,” Emily Cadik, executive director of the Affordable Housing Tax Credit Coalition, told AHF Live: Housing Developers Forum attendees at the end of April in New Orleans. “Everyone mobilized for this.”
Shannon Ross, vice president of government relations at the Housing Partnership Network, added, “It works to take people out to site visits, to write the letters, to come to the Hill. Every voter has a home. It really is a thing that resonates in a bipartisan way.”
However, Capitol Hill insiders warned there’s still a lot of work to do to shore up affordable housing production on the federal level.
“The omnibus got us 10% of what we lost in tax reform,” said David Gasson, executive director of the Housing Advisory Group and vice president at Boston Capital. “We are still bleeding units. The HUD piece in omnibus was a godsend and will help us a bit.”
Advocates are continuing its work to get support for the Affordable Housing Credit Improvement Act—H.R. 1661 sponsored by Reps. Carlos Curbelo (R-Fla.) and Richard Neal (D-Mass.) and S. 548 sponsored by Sens. Maria Cantwell (D-Wash.) and Orrin Hatch (R-Utah). Several new members have joined as co-sponsors of the bills in recent weeks.
The Cantwell-Hatch bill has 22 provisions, with income-averaging being the only one done in its entirety in the omnibus. The industry is still looking for a 50% increase in the LIHTC, the 4% floor, and other smaller provisions.
“We are hopeful that this could move,” said Ross. “Sen. Hatch has been a great champion and is unfortunately retiring at the end of the year, so that gives some urgency as well since this is a potential legacy for him to have the whole bill done.”
She said it’s possible that the bill could be attached to a package with tax extenders and other tax provisions in the lame-duck session after the election. “That’s the most realistic, I think, to get us on.”
Gasson added, “We are building a strong coalition of folks on both sides of the aisle for private-activity bonds.”
The Beltway insiders also briefed the audience on some other key issues to watch this year.
HUD secretary Ben Carson announced at the end of April a legislative proposal to reform the rental assistance program.
“The headlines in that is it would increase minimum rents, which just seems frankly cruel; it would allow states and localities to impose work requirements; and it also would raise the amount of rents people to pay from 30% of their income to 35% of income,” said Ross.
She added that House Republicans are working on a similar proposal and to expect regulatory proposals from all agencies with welfare programs in the coming months with reforms to encourage work after the administration’s executive order earlier in April.
Community Reinvestment Act (CRA) reform also is top of mind. Regulations haven’t been significantly updated in over two decades. Treasury released a set of recommendations to primary regulators Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, and the Federal Deposit Insurance Corp.in early April focusing on four key areas: assessment areas of banks, improving clarity and flexibility for CRA performance evaluations, improving the process and timeliness of the evaluations, and re-evaluating penalties for nonperformance.
“CRA needs to be modernized,” said Matt Josephs, senior vice president for policy at the Local Initiatives Support Corp. “In my opinion, what Treasury has put out by and large makes sense.”
The OCC is expected to release an advanced notice of proposed rulemaking on the CRA, but it is still not clear what the other regulators will do.
The industry also should be on the lookout in June for the final report, or at least a draft, on the LIHTC program, with a focus on development costs, from the Government Accountability Office (GAO).
“When this report comes out, it’s going to demonstrate the issues the industry is having in the context of how much it costs to build affordable housing,” said Gasson.
The cost per unit has been an ongoing issue for the LIHTC industry, especially in higher-cost markets where it’s much more expensive to build affordable housing.
Gasson added that the industry has been working with the GAO for a long time, and most people at the agency understand how the LIHTC program works and has been very fair in the context of its narrative.
“Our greatest concern is how the GAO frames it and the industry response,” he said. “The industry is going to have to be active on the Hill, and now [congressional] champions will have to defend what they have been advocating for all of these years to their colleagues.”