The need to solve the nation’s dire housing affordability challenge is magnified by economic conditions arising from the COVID-19 pandemic. Many of the millions of Americans who have lost their jobs during the pandemic were among the 1 in 4 rental households already paying more than half of their income in rent prior to the crisis.
The NAHB has asked Congress to address our nation’s shortage of affordable rental housing by protecting, expanding, and strengthening the low-income housing tax credit (LIHTC).
Since its inception in 1986, the LIHTC program has financed the development of over 3 million apartments. The development of these apartments has supported 3.4 million jobs and generated $323 billion in local income and $127 billion in federal, state, and local tax revenues in every part of the nation.
Without federal assistance, it is financially unfeasible to construct new, unsubsidized affordable rental units.
During the current economic downturn, LIHTC projects are at risk for postponement or cancellation, particularly projects financed through the 4% credit. The LIHTC consists of two subsidies—a 70% subsidy typically used for new construction, and a 30% subsidy generally used to purchase or renovate a building. These credit rates float and are determined by a formula based on how much it costs the government to borrow money.
When the program started, the credit rate was 9% for the 70% subsidy and 4% for the 30% subsidy. In response to the Great Recession, the Housing and Economic Recovery Act established a minimum floor for the 9% credit but did not address the 4% rate. Amid COVID-19 fiscal policy, the floating 4% credit has hit all-time lows near 3%, which translates into a reduction of nearly one-quarter of the equity flowing into the 4% LIHTC projects.
We face an unparalleled challenge to continuing production. Recommendations on workplace safety from the Centers for Disease Control and Prevention reduce the number of workers on a jobsite or involve other precautions that slow the pace of construction. As such, NAHB has asked the Internal Revenue Service and Department of Treasury to issue guidance to extend all LIHTC-related deadlines caused by the delays.
We’ve also joined forces with the ACTION Campaign, a coalition of national, state, and local organizations and businesses aimed at protecting and expanding the LIHTC. Our voices are amplified to help those struggling to afford shelter.
NAHB’s Affordable Housing Group represents professionals engaged in the development of affordable housing using programs like the LIHTC. The group’s efforts to educate policymakers have paved the way for improvements to federal policies and programs that benefit the affordable housing community.
We’re working to ensure housing remains part of the conversation during the 2020 elections. These efforts will help guarantee that much-needed homes critical to the nation’s recovery will move forward.
Note: Chuck Fowke assumed the chairmanship on June 22 and will serve in that capacity through the 2022 International Builders’ Show.