Housing Credit – The Low Income Housing Tax Credit (LIHTC)

Here are the main goals of VHA’s Housing Credit Campaign:

  1. Overall protection of the Housing Credit Program as tax reform progresses – This is the focus of our efforts. As tax reform proposals are periodically developed in both the House and Senate, the LIHTC is at risk of being wiped out with a range of other tax based programs or altered in a way that reduces the efficacy of the program. We have urged our Congress members to contact House Ways and Means and Senate Finance committee members with the message to leave the LIHTC alone, it’s working well here in Virginia and across the nation! When Chairman Camp most recently released his Tax Reform Act of 2014 in early 2014, his proposal preserved the Housing Credit with some changes even as it eliminated many other major tax credits and corporate tax expenditures. Chairman Camp’s proposal represents a vote of confidence for the Housing Credit that will ensure a high profile for the Program as tax reform advances but we will continue closely tracking tax reform moving forward.
  2. Setting a fixed floor rate for the Housing Credit – As enacted in the Tax Reform Act of 1986, the amount of LIHTCs that are awarded to development projects is based on a formula that uses the federal cost of borrowing to determine the credit rate. As the cost of borrowing declines, the amount of LIHTCs also declines. These floating rates lead to financial uncertainty, increase administrative complexity, and can lead to financing gaps for these badly needed affordable units. Lower rates mean states can allocate fewer Housing Credits into any one eligible project, even while the total credits a state can award remains unchanged. With the ‘floating rate’ in effect, there is 15 – 20 percent less Housing Credit equity available for any given affordable housing development, creating financing gaps that are increasingly difficult to fill. In 2008, 9% (for new construction and substantial rehab) and 4% (for acquisition) credit rate floors were set for the first time as part of the Housing and Economic and Recovery Act and were subsequently extended twice. These floor rates had such a significant impact on the effectiveness of the program that program advocates sought a permanent extension of the floor rates through legislative or budgetary means. In December 2015,  the 9% floor rate was permanently extended through the Protecting Americans From Tax Hikes (PATH) Act of 2015 as part of the Omnibus Consolidated Appropriations Act of 2016. Even with the achievement of this great victory, we will continue to track this issue and progress towards the minimum 4% rate for acquisition projects.
  3. Expansion of the credit and program improvements Tax Credits are a major driver and successful tool for affordable housing, LIHTC helps to addresses our nation’s severe shortage of affordable housing. VHA supports the bills S.548 and HR.1661, which propose significant changes that will lead to the creation or preservation of up to 400,000 new affordable homes over the next decade. These bills seek to:
    • Expand the housing credit by 50 percent, allocated over the next 5 years. Which will lead to the creation and preservation of up to 400,000 new affordable rental apartments. (only included in the Senate version)
    • Both bills are proposing a minimum 4 percent credit rate, which will target developers for more predictability and flexibility in Housing Credit financing.
    • Each bill would allow for income averaging with units at rents up to 80% AMI but requiring an overall average of 60% AMI. Income averaging has the benefit of allowing developments to maintain financial feasibility while providing a deeper level of affordability.

LIHTC 2017 Resources 

For more information about the proposals of these bills, click here for S.548 and for more information about bill HR 1661 click here.

Resources

Click below for VHC’s LIHTC fact sheets for each district. Economic impact information comes courtesy of the Economic Impact Calculators for Residential New Construction and Renovation developed by Housing Virginia and the Virginia Center for Housing Research using information from VHDA on Virginia’s LIHTC program between 1996 and 2016. These calculators can be found online in Housing Virginia’s Sourcebook.

Senators Kaine and Warner – 2017 LIHTC Fact Sheet- Virginia
Rep. Brat – 2017 LIHTC Fact Sheet- District 7
Rep. Connolly – 2017 LIHTC Fact Sheet- District 11
Rep. McEachin – 2017 LIHTC Fact Sheet- District 4
Rep. Goodlatte – 2017 LIHTC Fact Sheet- District 6
Rep. Griffith – 2017 LIHTC Fact Sheet- District 9
Rep. Garrett Jr. – 2017 LIHTC Fact Sheet- District 5
Rep. Beyer – 2017 LIHTC Fact Sheet- District 8
Rep. Taylor –2017 LIHTC Fact Sheet- District 2
Rep. Scott – 2017 LIHTC Fact Sheet- District 3
Rep. Wittman –2017 LIHTC Fact Sheet – District 1
Rep. Comstock2017 LIHTC Fact Sheet- District 10

The Affordable Rental Housing A.C.T.I.O.N. page is a great resource. Please visit their page and consider signing your organization on to their national campaign to protect the Housing Credit if you are not already signed up (you can check if you’ve already signed on here).

Affordable Rental Housing A.C.T.I.O.N. has also created State and District Fact Sheets on the impact of the Housing Credit. Click here for a Virginia State Fact Sheet.

For the latest action with the Housing Credit, please click here.