A 12.5% increase in the ceiling on
The bill, H.R. 7024, the Tax Relief for American Families and Workers Act of 2024, was introduced on Jan. 17 by Rep. Jason Smith, R.-Mo.; its Senate sponsor is Ron Wyden, D.-Ore. The House Ways and Means Committee marked up the bill on Jan. 19 and passed it on a 40-3 vote.
"At a time when so many people in Oregon and all across America are getting clobbered by rising rents and home prices, the improvements this plan makes to the Low-Income Housing Tax Credit will build more than 200,000 new affordable housing units," Wyden said in a joint press release with Smith.
Normally, the states have a 9% limit on LIHTC allocations. For tax years 2018 to 2021, that ceiling was increased by 12.5%.
That allowed the states to allocate more credits to affordable housing projects, which meant more funding could be done by private lenders. But that increase expired on Dec. 31, 2021, explained Mike Flood, the Mortgage Bankers Association's senior vice president of commercial and multifamily.
The organization issued a statement ahead of the markup session. "We support this bill, particularly for its meaningful enhancements to the Low Income Housing Tax Credit that will produce an estimated 200,000 additional rental units over the next two years," President and CEO Bob Broeksmit said.
What this bill does as introduced is to restore that 12.5% increase going back to tax year 2023 and going forward through 2025, Flood said in an interview.
Another change would lower what's known as the 50% test to 30%.
Affordable housing developments are eligible for the maximum amount of 4% housing credit equity if at least 50% of the cost is financed with private bonds, said a handout from the Affordable Housing Tax Credit Coalition on a similar bill introduced in 2023.
The original threshold of 70% when the program was enacted in 1986 was too high, so it was reduced four years later to the current level, the handout said. The organization claimed it is still too high, thus creating inefficiencies and limiting affordable housing development.
"I am pleased that provisions from our Affordable Housing Credit Improvement Act were included in the Tax Agreement, which will provide a much-needed boost in housing supply and benefit seniors and working families in Illinois and throughout the country," said AHCIA lead sponsor Rep. Darin LaHood, R-Ill., in a press release from the AHTCC about this latest bill.
The cap is independent of a
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NeighborWorks America's network In fiscal year 2023 developed, acquired, and/or preserved 11,500 rental homes through investments totaling nearly $2.6 billion. That network has a total rental portfolio of nearly 204,600 homes.
"While low income housing tax credits are a great resource for ensuring long-term affordability, they only cover a portion of the cost necessary to create and preserve quality affordable housing," said Christie Cade, regional vice president of the Southern Region at NeighborWorks America, in a statement. "The NeighborWorks network and other developers have to secure additional low-cost financing that is layered with low income housing tax credits and affords the development with the ability to manage the long-term cost with restricted rents."
The 12.5% increase in the limit between 2018 and 2021 boosted the supply of affordable housing, the MBA's Flood said.
"There's bipartisan agreement that the LIHTC program is one of the most successful out there," he continued. "This is the government seeing data and facts and moving forward with what they know is successful and just increasing the ability for states to do more affordable housing tax credits."
