The Affordable Housing Credit Improvement Act (AHCIA)continues to garner bipartisan support, with more than 40% of Congress having signed on as co-sponsors as of mid-November.
Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition, told attendees at AHF Live during the Capitol Hill Update that by adding more Republican and Democratic co-sponsors, there’s a better chance to see action on the long-sought low-income housing tax credit (LIHTC) provisions in the bill.
“There is an affordable housing crisis, and we have a solution,” she said. “The game is not over for this Congress for weeks and months before things shut down for the 2024 election.”
David Gasson, principal and founding partner at MG Housing Strategies, added that the support is there at the highest levels within the administration and Congress to get something done. “The only thing that will get in the way is politics,” he noted.
Cadik said there are more bipartisan talks about a tax package this year than there have been in the past. Last year, Democrats wanted a large expansion of the child tax credit and Republicans wanted tax extenders like research and development investment. But then time ran out at the end of the year before an agreement could be reached.
“If there’s a third element added to a tax bill, it’s going to be the LIHTC, but it’s very much on the bubble. It’s going to require us to be squeaky wheels for the next weeks and months, however long it takes because If they do come to a deal on the Republican versus Democratic priorities, it would be very easy for them to draw the line right after that and just say there’s too much other stuff [to add].”
She added that since 2024 is an election year, there won’t be another major tax bill until 2025.
“Our message has to be that this crisis has gone on too long, and we can’t wait until 2025 to do something on affordable housing. We had an unprecedented cut to the program—the 12.5% allocation increase—and we have to keep reminding members of Congress that we heard there may be a tax bill and that they need to include the LIHTC. Even if you just convey that to any members of Congress with whom you have a relationship, it’s going to take that to get it into the mix.”
While there are about 30 provisions in the AHCIA (S. 1557 and H.R. 3238), there are several that really impact how many units can be financed and where advocates are putting their focus, said Peter Lawrence, director of public policy and government relations for Novogradac.
The primary one is restoring the 12.5% cap increase that was enacted in 2018 and expired in 2021. The nation has financed 19,000 fewer units, and one of the reasons is losing the 12.5% increase, he noted. He said by adding it back, Novogradac has estimated the nation would get back roughly 5,000 to 6,000 units annually.
“It’s an extender, so that’s why we’re in the tax bill conversation,” Lawrence said. “We’re focused on getting that back.”
In addition, other key provisions include increasing LIHTC allocation authority by 50%, phased in evenly over two years, and lowering the private-activity bond financing threshold from 50% to 25%.
“If we are able to lower that bond financing test over a 10-year period, we can finance 1.4 million new affordable homes, and that would be a huge improvement and a huge way of addressing the affordable housing crisis,” he said.
Debra Guerrero, senior vice president of strategic partnerships and government affairs at The NRP Group, reiterated the need for developers to get out the message. “We need more resources to get units on the ground,” she said. “Delivering that message is so important. We can’t miss an opportunity. Elected legislators want to hear our stories. They want to hear about the people that we’re employing, they want to hear about the deals we are financing.”
Inviting elected officials and their staffs to groundbreakings, grand openings, or just to visit properties does make a difference, she added.
Community Reinvestment Act
In October, the Federal banking regulators—the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corp.—released their final rule on Community Reinvestment Act (CRA) reform.
Housing leaders are still analyzing the regulations to see what impact it might have on the LIHTC market.
“What we can tell you confidently is it’s better than the proposed regulations. What we cannot tell you confidently, and won’t be for a while, is how the new regulations compare to the status quo of the existing regulations,” said Cadik. “The reason we have been watching CRA so closely is because upward of 80% of the LIHTC market comes from banks that have CRA obligations, and it has been a major driver of investment. You can see 20-cent pricing differentials in CRA hot markets versus not. Any little change to CRA can have a major impact on affordable housing investment and appetite.”
Cadik noted that one positive was that regulators took the industry’s feedback seriously and adopted quite a few recommendations on the proposed regulations in the final version. “We are glad to see quite a few of our recommendations adopted, including creating a new community development investment benchmark and metric,” she said, adding that there will be an opportunity for clarifying guidance and FAQs.
Congress avoided a government shutdown in mid-November with a bifurcated continuing resolution. The first tranche would fund the departments of Transportation, Housing and Urban Development (HUD), Energy, Veterans Affairs, and Agriculture through Jan. 19, while the second tranche would fund the rest of government through Feb. 2.
National Leased Housing Association executive director Denise Muha said, while there are some cuts proposed for the HUD appropriations, she is pleased with the overall numbers she has seen from the House and Senate.
She cited the work that the industry has done in talking with members of Congress about how subsidy programs work.
“They get the fact that if they cut, people will be hurt, people will be leaving their apartments. That’s nothing they want to be associated with,” Muha said. “If we’ve done nothing else over all these years, it’s been educating the appropriators. We have been dodging the bullets as far as cuts go, and hopefully we will continue to do so.”