President Biden’s proposed budget unveiled Thursday includes the lowering of the private activity bond threshold for Low Income Housing Tax Credits to 25% from 50% and muni lobbyists, though skeptical about the prospects of the budget passing as is, say they will work hard to include the provision in any final budget.
“While the President’s budget is likely nothing more than a messaging document, we were pleased with several proposals including the continued focus on infrastructure, as well reducing the private activity bond financing requirement from 50% to 25% for affordable housing,” said Brett Bolton, vice president of federal regulatory and legislative policy at Bond Dealers of America. “While the budget as a whole will not become law, we will continue to work with the administration and the Hill to advance the muni provisions within the proposal.”
Lowering the threshold to 25% was included in a 2021 draft of the ill-fated Build Back Better bill and according to the proposed budget, would help to “leverage more private capital into LIHTC deals and build more units of affordable housing.”
Measures to address the housing shortage across the country have also been discussed this week by the Senate Finance Committee and last week in the Senate Committee on Banking, Housing and Urban Affairs, who called for a “whole of government” approach to addressing the shortage.
The issue of expanding the supply of affordable housing has reached a higher pitch than usual while in the midst of the current budget talks. During a March 7 Senate Finance Committee hearing, Denise Scott, president of the Local Initiatives Support Corporation, told lawmakers that there’s little doubt we’re in an affordable housing crisis.
“Rents have been rapidly climbing, supply has been tightening, costs of construction have been increasing and we have underproduced roughly 3.8 million homes,” Scott said.
Ranking member of the Senate Finance Committee Mike Crapo, R-Idaho, suggested this week that government policy is getting in the way of the tax credit’s utility.
“Targeted tax policies such as LIHTC are an important part of solving housing affordability and supply issues, but we must also address the drivers that are raising the cost of housing generally,” Crapo said. “When input and regulatory costs are high, LIHTC is less effective.”
On Friday, Treasury Secretary Janet Yellen, appearing before the House Ways and Means Committee, touched briefly on the matter.
“I think we really have a serious shortage of affordable housing and it really makes it very difficult to hire workers to be able to support business expansion, when lower income workers are unable to even afford to be able to live anywhere near where they work,” Yellen said. “And I think that’s been a failing of our housing policy that we believe should be corrected.”
But Rep. Suzan Delbene, D-Wash., said she’ll be reintroducing the Affordable Housing Credit Improvement Act of 2021 with support from Ways and Means Committee members Darin LaHood, R-Ill., Brad Wenstrup, R-Ohio, and Don Beyer, D-Va.