Sens. Maria Cantwell (D-Wash.) and Pat Roberts (R-Kan.) introduced a bill Tuesday to establish a permanent minimum rate for the low-income housing tax credit (LIHTC).
The legislation would permanently set fixed 9% (for new rental construction property) and 4% (for acquisition) rates for the program.
“The industry is very fortunate to have two strong supporters in Sens. Roberts and Cantwell,” says David Gasson, vice president of Boston Capital and executive director of the Housing Advisory Group. “This legislation, once enacted, will be a significant step in addressing the nation’s growing need for affordable housing, and we hope the House and Senate will finally move forward with tax legislation that will include passage of the LIHTC fixed-rate proposal.”
Cosponsors include Sen. Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Barbara Boxer (D-Calif.), Ben Cardin (D-Md.), Mike Crapo (R-Idaho), Dianne Feinstein (D-Calif.), Al Franken (D-Minn.), Kirsten Gillibrand (D-N.Y.), Mazie Hirono (D-Hawaii), Angus King (I-Maine), Amy Klobuchar (D-Minn.), Patrick Leahy (D-Vt.), Robert Menendez (D-N.J.), Patty Murray (D-Wash.), Bernie Sanders (I-Vt.), Chuck Schumer (D-N.Y.), Jeanne Shaheen (D-N.H.), Debbie Stabenow (D-Mich.), Elizabeth Warren (D-Mass), and Sheldon Whitehouse (D-R.I.).
Fixing a minimum rate may seem like a small change, but it has a big impact.
In 2008, the Housing and Economic Recovery Act created a temporary 9% floor for projects, allowing developers to receive additional credits during the economic downturn. However, the fixed rate has since expired, so the LIHTC industry has had to go back to using a floating rate that’s been about 7.5%. At the lower rate, a project may receive as much as 20% less equity.
"The expiration of the minimum credit is reducing access to resources to fund affordable housing while the need is skyrocketing,” says Todd Crow, president of the Affordable Housing Tax Credit Coalition and executive vice president and manager of tax credit capital for PNC Real Estate, in a statement. “A permanent floor on the credit rate will increase housing availability for low-income families, veterans, seniors and individuals who are homeless or living with disabilities."
The Senate bill is identical to H.R. 1142, which was introduced in the House by Reps. Pat Tiberi (R-Ohio) and Richard Neal (D-Mass.) at the end of February. H.R. 1142 would apply to buildings placed in service after Dec. 31, 2014.
“We are glad that we have House and Senate legislation moving forward,” says Peter Lawrence, director of public policy and government relations at Novogradac & Co. “The affordable housing community continues to press the case with Congress. We are hopeful that we might be able to get the minimum housing credit rate advanced earlier than it happened last year.”
Lawrence notes that the LIHTC is the primary capital resource for building affordable housing in the country.
The bill's introduction is a critical step, but the journey continues, according to Bob Moss, principal and national director of governmental affairs at CohnReznick.
“Our fixed-rate battle goes on due to the many advocates we now have around the country for the LIHTC," he says. "We know the importance of this technical fix—as do our champions in Congress, including Rep. Tiberi, Rep. Neal, and both Sens. Cantwell and Roberts. While H.R. 1142 has so far gained 56 co-sponsors from both parties, the companion Senate bill offered by Sen. Cantwell and Sen. Roberts will need more support from Senate Republicans on the Finance Committee in order to gain momentum. We have work to do."
Enterprise Community Partners also commended Cantwell and Roberts for introducing the bipartisan legislation.
“Protecting and expanding the housing credit is absolutely critical if we’re to end America’s growing housing insecurity crisis,” says Ali Solis, senior vice president of public policy and corporate affairs at Enterprise. “With one in four renters paying more than half their income in housing costs each month, an astounding 82% jump since 2000, we need to redouble our efforts to create high-quality affordable housing across the country. Too many families are forced to make toxic trade-offs between paying rent and seeing the doctor, buying healthy food, and keeping the lights on. By making the 9% and 4% credit floors permanent, the ‘Improving the Low-Income Housing Tax Credit Rate Act’ will help create more affordable homes, the foundations of opportunity, in thriving communities linked to jobs, good schools, transit, and health care.”
Cantwell says the LIHTC helps finance 90% of the affordable housing developments in the country.
"The low-income housing tax credit supports more than 90,000 jobs each year nationwide and has helped leverage nearly $100 billion in private investment in these critically needed affordable housing units," says Cantwell, a member of the Senate Finance Committee, in a statement. "That's why we must permanently extend this critical provision without delay and give states the certainty they need to help address the affordable housing crisis in this country."
