On May 5, Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS) introduced the “Improving the Low-Income Housing Tax Credit Act” (S. 1193). The bill would make the Low Income Housing Tax Credit (LIHTC) 9% fixed floor rate permanent for new construction and substantial rehabilitation projects, and establish a 4% fixed floor rate for acquisition projects. S.1193 is a companion bill the H.R 1142, introduced by Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA) on February 26 (see Memo, 3/16).
In a media release, Senator Cantwell said, “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. 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.”
A minimum 9% tax credit rate was included in the Housing and Economic Recovery Act of 2008, but it expired for rental units placed in service after December 31, 2013. The American Taxpayer Relief Act of 2012 allowed any project receiving a LIHTC allocation before January 1, 2014 to qualify for the fixed 9% credit. The Tax Increase Prevention Act of 2014 provided a fixed 9% minimum, but it only extended the rate through December 31, 2014.
The Tax Reform Act of 1986 established a formula that uses the federal cost of borrowing to determine the actual credit rate for LIHTCs awarded to development projects. As the cost of federal borrowing declines, the value of LIHTCs also declines. For example, now “9%” credits have a 7.44% applicable percentage. By establishing a fixed minimum credit, S. 1193 would protect prospective LIHTC developments from reductions in investor equity used to finance affordable housing.
S. 1193 was referred to the Senate Committee on Finance and currently has 22 cosponsors.
The text of the bill will be at https://www.congress.gov/bill/114th-congress/senate-bill/1193.
The media release from Senator Cantwell’s is at http://www.cantwell.senate.gov/public/index.cfm/press-releases?ID=ce35c971-ea12-43a4-9547-588f8332e1c3
More information about the LIHTC program is on page 5-32 of NLIHC’s 2015 Advocates’ Guide, http://nlihc.org/sites/default/files/Sec5.10_LIHTC_2015.pdf