Tax legislation containing key provisions to expand the low-income housing tax credit (LIHTC) has taken another step forward.
The Ways and Means Committee has advanced a reconciliation bill, moving it closer to the full House of Representatives.
The legislation includes several proposals that are part of the Affordable Housing Credit Improvement Act (AHCIA), including:
- Restoring the 12.5% credit allocation increase that expired in 2021 for 2026 to 2029;
- Lowering the 50% bond financing threshold test to 25%; and
- Providing a 30% basis boost to help create affordable housing in rural and Native American communities.
“The upshot is this bill can significantly increase the amount of affordable housing that gets built nationwide because it creates a path to ending the backlog faced by nearly every state,” says Daniel Cruz Jr., senior vice president at the Cruz Cos., an affordable housing developer based in Boston. “In Massachusetts and every other market where we’re active, the private-activity bond queue has become a bottleneck. This bill will probably reduce that backlog by half. That’s huge.”
The expanded LIHTC resources will ultimately make a difference for those in need of affordable housing, according to Cruz.
“Every state is pressed to keep up with the demand right now,” he says. “Between the 9% tax credit increase and the private-activity bond threshold reduction, we’re going to see a major improvement in outcomes. It’s a win-win.”
The inclusion of AHCIA provisions in the Ways and Means markup of the tax bill is an early but significant step, says David Gasson, a partner at MG Housing Strategies and executive director of the Housing Advisory Group.
“It demonstrates the support we have, not only from bipartisan members of the tax writing committee, but with the chairman [Jason Smith], who was under incredible pressure to include so many tax preferences in the bill,” he says. “This is another indication of how important advocacy is to our success.”
If the bill passes the House, it heads to the Senate, where housing advocates feel they are also in a strong position.
“We will try to improve upon what was included in the House package, especially when it comes to the 9% allocation increase,” Gasson says.
He adds that he does not expect any other provisions of the AHCIA, perhaps other than the basis boosts for bonds and extremely low-income units, to be included in the tax bill. Many of the AHCIA provisions do not qualify for the bill under the reconciliation rules, according to Gasson.
Surviving the committee markup is a “welcome step toward the creation of hundreds of thousands of additional affordable homes in the U.S.,” says Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition.
“At a time when housing costs remain high, and safe, affordable homes remain out of reach in too many communities across the country, we applaud the committee’s action toward resolving a crisis that continues to affect millions of Americans,” Cadik says.
Cadik’s AHTCC reports that the AHCIA has attracted more than 130 bipartisan cosponsors in the House and 36 cosponsors in the Senate—including nearly two-thirds of the Senate Finance Committee—with support from lawmakers representing 46 states across the country.
Although the legislation has amassed widespread support, the road ahead will be challenging. The Washington Examiner recently quoted Rep. Glenn Grothman, a Republican from Wisconsin, saying he is against the LIHTC expansion being in the tax bill.
“It’s ridiculous that the credit is still in a Republican bill, much less that they’re expanding it,” he tells the publication. “I mean, I think it shows a lack of sincerity on the part of leadership in trying to shrink the role of government.”
Grothman doesn’t say he will oppose the larger tax legislation. However, his comments show how tough it is to get everyone behind a bill.
Still, housing advocates are optimistic that lawmakers will bolster the nearly 40-year-old program as families struggle with housing across the country.
“We are a bit more confident about passage of the tax bill this year compared to the Wyden/Smith bill last year because it is moving through the reconciliation process, meaning Republicans have pride of authorship in both the House and Senate and will get credit if the bill passes,” Gasson says. “We always tout the bipartisan support for the LIHTC, but the reality of Washington is the parties’ care about who gets credit sometimes and tax bills are one of those times. If the speaker [Mike Johnson], majority leader [John Thune], and President Trump can bridge the significant differences between members of the House and Senate, largely around increasing the deficit, changes to Medicaid, and changes to the cap for state and local taxes, we could finally see the most significant investment in affordable housing since 2018.”
