House members led by Suzan Delbene, D-Wash., and Brad Wenstrup, R-Ohio, are urging House leaders to extend the 12.5% low-income housing tax credit allocation increase and lower the private activity bond requirement to 25% from 50% in a bid that responds to inflation as well as the affordable housing shortage gripping cities.
That ask was detailed in a letter addressed to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy and signed by 29 Democrats and 25 Republicans.
“There is a pipeline of Housing Credit developments that are ready to go, but the program is vastly oversubscribed,” the letter said. “Due to congressional inaction to extend this increase, every state is now facing a 12.5% cut to Housing Credit resources during an affordable housing shortage,” the letter added. “We are at an inflection point in our country which demands an urgent policy response to increase affordable housing production.”
Nearly half of all states have already reached their federally-allocated PAB cap under the current regime, which gives 4% housing credits if 50% of a development is funded using PABs.
“Lowering the ’50 percent test’ would allow all states to more efficiently use their PAB cap and quickly unlock desperately-needed resources for shovel-ready developments, which will produce more than one million new affordable homes over the next decade,” the letter said.
If these were put into effect, they would build or preserve more than 1.5 million additional affordable homes, the letter said.
The low-income housing tax credit was enacted as part of the 1986 Tax Reform Act and has since been modified a number of times. Starting in the mid-1990s, the program has constructed or rehabilitated around 110,000 affordable rentals each year, before dropping off significantly following the Great Recession in 2008. It has contributed a total of more than 3.6 million affordable housing units since its inception.
The 2018 Consolidated Appropriations Act increased the amount of tax credits available by 12.5% in all states through 2021.
Expanding the low-income housing tax credit has been a topic of discussion for the House Ways and Means Committee and its chairman Richard Neal earlier this year and was included in drafts of the Build Back Better bill from last year that is all but extinct.
Advocates for the market applauded the letter and leaders involved for acknowledging the need for action on this matter.
“We applaud Representative Delbene and Wenstrup for recognizing the immediate and urgent need to take action to address our affordable housing crisis and for galvanizing bipartisan support around these critical proposals to expand and strengthen the Housing Credit,” said Emily Cadik, chief executive officer of the Affordable Housing Tax Credit Coalition. “These measures will allow us to immediately ramp up affordable housing production and tackle one of the primary drivers of inflation at a time when rents are skyrocketing.”
“Representatives Delbene, Wenstrup, and all the members of the House of Representatives who signed this letter understand how the scarcity of affordable rental housing is harming their constituents, who recently have seen rents increase at an unprecedented rate, leaving them unable to afford basic necessities and putting them at risk of homelessness,” said Jennifer Schwartz, ACTION Campaign co-chair and director of tax and housing advocacy with the National Council of State Housing Agencies. “Our nation simply needs more affordable rental housing to meet the demand and the best way to finance it is through the proven and bipartisan Housing Credit.”