The National Association of Home Builders (NAHB) has strongly endorsed passage of a bill, recently introduced into the U.S. Senate which the trade group says would promote the construction of sorely needed rental apartments and help alleviate the nation's affordable housing crisis. The proposed legislation, S.548 tagged as the Affordable Housing Credit Improvement Act of 2017, is sponsored by Senators Sens. Maria Cantwell (D-WA) and Orrin Hatch (R-UT).
On the tenant benefit side of the ledger, the bill would amend the Internal Revenue Code, renaming the Low-Income Housing Tax Credit as the "the affordable housing credit" and increasing state allocations for the credit and the cost-of-living adjustments. It also revises the average income test for tenant eligibility requirements, and other requirements such as income eligibility for rural projects, increased tenant income, student occupancy rules, and tenant voucher payments that are considered rent.
The bill also would also seek to make more affordable housing available through the following concessions to builders, developers, and property owners:
- Establishes a 4% minimum credit rate for certain projects,
- Permits relocation costs to be counted as rehabilitation expenditures,
- Repeals the qualified census tract population cap,
- Requires housing credit agencies to make certain determinations regarding community revitalization plans,
- Prohibits local approval and contribution requirements,
- Increases the credit for certain projects designated to serve extremely low-income households and for certain bond-financed projects designated by state agencies,
- Increases the population cap for difficult development areas, and
- Eliminates the basis reduction for affordable housing properties that are allowed the credit and receive certain energy-related tax credits and deductions.
The bill also modifies requirements regarding the reconstruction or replacement period after a casualty loss, rights related to building purchases, the prohibition on claiming acquisition credits for properties placed in service in the previous 10 years, foreclosures, and projects that assist Native Americans.
NAHB Chairman Granger MacDonald testified before the
Senate Finance Committee in support of the bill, telling lawmakers it is
essential to increase the resources supporting housing production to meet the
growing need for affordable rental housing.
He said the bill, "(T)akes a significant and needed step to boosting
supply by increasing Low Income Housing Tax Credit (LIHTC) allocations by 50
percent. Enacting this bill is expected
to result in an additional 400,000 LIHTC units over the next 10 years. NAHB estimates
that added construction would increase federal tax revenue by $11.6 billion and
state and local revenues by $5.6 billion."
NAHB quotes the Harvard University Joint Center for Housing Studies which says renter households that spend more than half their monthly income on rent, putting them in the category of "severely cost burdened," are at an all-time high of 11.4 million. This translates to more than one in four of all renters in the U.S.
"Fees, regulatory compliance, modern building and energy codes, building materials, land and labor costs determine whether a project is financial viable," said MacDonald. "If we want to provide affordable rental housing for lower-income households, we cannot do so without a subsidy."
NAHB says, since its inception, the tax credit program has produced and financed more than 2.9 million affordable apartments for low-income families, seniors and individuals with special needs and it calls the tax credit an important job creator. It generates approximately $7.1 billion in economic income and roughly 95,000 jobs per year across many industries. This is why the LIHTC, a unique private-public partnership, is such an indispensable program, McDonald said.
"The nation lacks enough affordable housing for hard-working families," said MacDonald. "The only effective long-term solution is to increase supply. Passing this bipartisan legislation would greatly enhance our ability to meet the growing demand for more affordable rental units."