Legislation has been introduced to establish a Workforce Housing Tax Credit (WHTC) that aims to increase the supply of housing for middle-income families.

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Building on the success of the low-income housing tax credit (LIHTC), the proposed credit, which has also been called the middle-income housing tax credit (MIHTC), would finance an estimated 344,000 rental homes.

“Right now, America’s nurses, firefighters, and teachers are struggling to find affordable housing near the communities they serve. More must be done to fill the ‘missing middle’ between low-income housing and million-dollar homes,” said Senate Finance Committee chair Ron Wyden (D-Ore.). “Establishing a middle-income tax credit will guarantee more housing, and the flexibility our bill provides will help housing finance agencies best meet the needs of their individual communities.”

Wyden introduced the legislation along with Sen. Dan Sullivan (R-Alaska), Rep. Jimmy Panetta (D-Calif.), and Rep. Mike Carey (R-Ohio).

Sponsors noted that the proposed credit would work in conjunction with the LIHTC to support low-income affordable housing. First, a state can tailor the allocation to its needs: It can elect to transfer any portion of its middle-income allocation to LIHTC at any point during the year. Second, WHTC can help the financial feasibility of affordable buildings by combining LIHTC and middle-income housing tax credits for different units as long as at least 20% of the total units are middle-income units.

Other highlights of the Workforce Housing Tax Credit Act include:

  • Similar to LIHTC, state housing finance agencies would allocate the tax credits to developers through a competitive process. The tax credits would be provided to developers over a 15-year period, with a 15-year compliance period and a 30-year extended commitment;
  • Tax credits would be allocated to states based on population. For 2024, the allocation would be $1 per capita with a $1.5 million small state minimum. An additional 5% of the allocation is made available and reserved for middle-income housing developed in rural areas;
  • For new buildings, the credit would equal 50% of the cost of the building over the lifetime of the credit. For rehabilitated buildings and bond-financed buildings, the credit would equal 20% of the cost of the building. More credit can be awarded for buildings in difficult development areas, as designated by the Department of Housing and Urban Development. However, state housing agencies would only allocate the amount of credit needed to make a housing project financially feasible;
  • To qualify for the credit, at least 60% of the building’s units must be occupied by individuals with an area median income (AMI) of 100% or less where the rents are restricted to 30% of the designated income. The affordability restrictions would remain in place for up to 15 years after the compliance period (for a total 30-year affordability period); and
  • The effective date for this provision would be buildings placed in service after 2023, in taxable years after 2023.

“More and more Americans are finding themselves struggling to make rent or find housing in the communities where they work,” said Alicia Huey, chairman of the National Association of Home Builders and a custom home developer from Birmingham, Alabama. “The Workforce Housing Tax Credit Act would provide states and developers with a new source of funding to produce affordable rental housing serving workers earning up to 100% of the AMI. This is exactly the type of solution we need Congress to enact in order to begin solving the housing affordability crisis.”

“It is no secret that the nation faces a severe affordable housing shortage. Senator Wyden has led the charge to address this crisis through his efforts to secure and expand the LIHTC. Now, along with Sen. Sullivan in the Senate and Congressmen Panetta and Carey in the House, these leaders are expanding on those efforts with the introduction of the middle-income housing tax credit,” stated David Gasson, executive director of the Housing Advisory Group and a partner at MG Housing Strategies. “As the LIHTC does for families, seniors, and veterans, the MIHTC will address the vital need for housing of our workforce and those not able to afford market rate housing. We are very appreciative of these housing champions and their efforts to address the nation’s housing crisis.”

“NMHC and NAA strongly support the introduction of the Workforce Housing Tax Credit Act by Sens. Wyden and Sullivan and Reps Panetta and Carey. The Workforce Housing Tax Credit would complement the widely successful low-income housing tax credit by supporting moderate income households that are also facing rising housing costs. It would help expand the supply of housing available in communities across the country which, in turn, will help create more housing affordability,” added National Multifamily Housing Council president Sharon Wilson Géno and National Apartment Association president and CEO Robert Pinnegar.

A one-page summary of the Workforce Housing Tax Credit Act can be found here.

Legislative text can be found here.