The low-income housing tax credit (LIHTC) program may be in serious trouble if—and it's a big if—the 12-member “super committee” charged with finding an additional $1.5 trillion in deficit reduction over the next 10 years can agree on a plan.

There are six Republicans and six Democrats on the panel, and seven votes will be needed to send a deficitcutting bill to the House and Senate. The Republicans are Sens. Jon Kyl (Ariz.), Pat Toomey (Pa.), and Rob Portman (Ohio), and Reps. Dave Camp (Mich.), Jeb Hensarling (Texas), and Fred Upton (Mich.). The Democrats are Sens. Max Baucus (Mont.), Patty Murray (Wash.), and John Kerry (Mass.), and Reps. Xavier Becerra (Calif.), Chris Van Hollen (Md.), and James Clyburn (S.C.).

Murray and Hensarling will serve as co-chairmen.

Substantial cuts in discretionary spending are a given in any deficit reduction plan, but the sticking points for the panel figure to be entitlement reform and revenues. The Democrats oppose entitlement changes that would reduce benefits, and the Republicans don't want tax rates increased, even for the wealthy.

What some Republicans might agree to, however, is a tax reform package that reduces rates while eliminating so-called tax expenditures. These are the special deductions, exclusions, exemptions, and preferential tax rates that are aimed at encouraging certain types of social and economic activity—such as low-income housing. Together, they cost the government hundreds of billions of dollars in revenue every year.

Advocates of the housing tax credit (along with supporters of other special provisions) are certain to argue that it has been a beneficial program well worth its cost, producing hundreds of thousands of units of housing for the poor.

The merits of the program, however, are likely to be beside the point. If the super committee members decide that comprehensive tax reform is the way to generate additional revenue without raising tax rates, they won't go through the hundreds of tax expenditures in the code to pick out certain ones for elimination.

In the first place, they won't have the time, since they face a Nov. 23 deadline for reporting legislation. In addition, preserving large numbers of tax expenditures would quickly erode any revenue gains.

Instead, the panel will probably retain only a handful of the most favored provisions, such as the deductions for home mortgage interest and charitable contributions, and even those may be cut back. The LIHTC isn't likely to be on the list.

CDFI Fund reports heavy demand for NMTCs

One of the special provisions in the tax code that remains popular with participants is the New Markets Tax Credit (NMTC) program, with the Community Development Financial Institutions (CDFI) Fund reporting heavy demand for the 2011 program round.

The CDFIFund received 314 applications from community development entities (CDEs) for $26.7 billion in investment allocation authority, over seven times the $3.5 billion available. The applicant CDEs have headquarters in 44 states and the District of Columbia.

“The strong, continuous demand for NMTC allocation authority demonstrates the critical need for investments in our nation's low-income communities," said CDFIFund Director Donna J. Gambrell. “The NMTC is an effective— and cost-effective—way to create jobs and drive investment in communities with high rates of poverty and unemployment."

Administration, Congress consider rental of foreclosures

The Obama administration and Congress are looking at the conversion of foreclosed homes to rental housing as one way to relieve the pressure of the real-estate owned (REO) inventory on the housing market.

The Department of Housing and Urban Development, the Treasury Department, and the Federal Housing Finance Agency (FHFA) are seeking suggestions on new ways to sell singlefamily REO properties held by the FHA, Fannie Mae, and Freddie Mac. The goal is to find ways to maximize the value of the properties to taxpayers, boost private investment in housing, and address rental and affordable housing needs.

The plan envisions bulk sales of REO properties in specified geographic areas through a joint venture or some other structure that would make use of the capital and management expertise of private parties.

A request for information from the government agencies is calling for approaches that will reduce the REO portfolios of FHA and the governmentsponsored enterprises (GSEs) in a cost-effective way, reduce the severity of average loan losses compared with individual sales of distressed properties, address repair and rehabilitation needs, respond to local economic and real estate market conditions, and support neighborhood and home price stabilization efforts.

The agencies anticipate proposals that will involve the conversion of REO properties to rental housing, including programs for previous homeowners to rent properties or for renters to become owners through lease-to-own plans, strategies to support markets with a sizable REO inventory and strong demand for rental units, a mechanism for private owners of REO properties to eventually participate in the transactions, and support for affordable housing.

“As we continue to move forward on housing finance reform, it's critical that we support the process of repair and recovery in the housing market," said Treasury Secretary Tim Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhoods and home price stability."

In a related development, Rep. Gary G. Miller (R-Calif.) has introduced legislation (H.R. 2636) that would authorize depository institutions and the GSEs to lease their foreclosed properties for up to five years. The bill is co-sponsored by Rep. Spencer Bachus (R-Ala.), Rep. Barney Frank (D-Mass.), and Rep. Carolyn McCarthy (D-N.Y.).

The intent, according to the bill, is to help stabilize home values and restore confidence in the market by taking foreclosed homes off the for-sale market. Moreover, it says, “providing a means for foreclosed property to remain occupied during the housing downturn will preserve the property itself as well as the aesthetic and economic values of neighboring homes and even whole neighborhoods.”

Barry G. Jacobs is editor of Housing and Development Reporter, the nation's premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The twopart publication includes informed reports and insightful analyses in “HDR Current Developments,” and an up-todate compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law. For more information, call (800) 723-8077.