House Passes HEROES Act, Senate Advocacy for 4% Housing Credit Rate Continues
On May 15, the House of Representatives passed a bill in a narrow party-line vote that would provide $3 trillion to address emergency measures as part of the ongoing coronavirus response. The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), H.R. 6800, includes funding for a wide range of programs, including critical investments in affordable housing and community development. In addition to other non-housing related provisions, the bill would provide $100 billion for emergency rental assistance through the Emergency Solutions Grant program, establish a $75 million fund to help homeowners pay their mortgages, and expand and extend the eviction moratorium and forbearance allowances established under the Coronavirus Aid, Relief, and Economic Security Act that Congress passed in March. However, the HEROES Act does not include the immediate relief needed for the Low-Income Housing Tax Credit (Housing Credit) as a result of the crisis. Click here to read more about the HEROES Act.
It is now up to the Senate to take up the next COVID-19 response package, the leadership of which has so far dismissed the House bill as dead on arrival. We expect that the Senate, once it begins working on legislation, will have different priorities than the House and legislation coming from that chamber will likely be narrower in scope.
The ACTION Campaign is continuing our advocacy with the Senate, with the hopes that the Senate may be willing to include our Housing Credit priorities in their version of the next bill. We are strategically narrowing our focus for Senate advocacy to enacting a minimum 4 percent Housing Credit rate, which has the best chance of advancement considering the falling rate tied to federal borrowing rates. The proposal to establish a minimum 4 percent Housing Credit rate already has strong bipartisan support, is directly responsive to new affordable housing challenges created by the COVID-19 crisis, and has precedent from when the corresponding minimum 9 percent rate was enacted in response to the 2008 economic crisis. ACTION will continue to advocate for additional Housing Credit priorities in future recovery packages, where there could be more opportunities to include Housing Credit provisions.
Advocates should ask their Senate offices to urge Senate Leadership to include important emergency measures to keep critically-needed affordable housing and the jobs that produce those homes moving forward in the next COVID-19 response package by setting a minimum 4 percent rate for the Low-Income Housing Tax Credit.
Because of the COVID-19 crisis, crucial affordable homes across the country are now facing issues that may make them financially infeasible, and are in urgent need of solutions. As is further explained in a letter signed by over 2,300 organizations across the country, a number of measures will be needed to stabilize our affordable housing system and allow us to keep building homes for the millions who need them, including additional resources and flexibilities.
Most urgently, a minimum 4 percent Housing Credit rate will make more developments financially feasible in light of the historically low rate – now down to 3.08 – that has fallen precipitously as the result of the cuts to the federal borrowing rate in response to the crisis. The IRS updated the applicable federal rates for June, and as expected, the “4 percent” rate is falling even farther – it will now be an even lower all-time low of 3.07 percent for June.
The precipitous drop in rate is jeopardizing thousands of affordable homes already underway by creating significant unforeseen financing gaps. Setting a minimum 4 percent Housing Credit rate would create 126,000 additional affordable homes and over 157,000 construction and related jobs over the next decade.
For questions or to share feedback from interactions with Senate offices, please contact Sarah Brundage at firstname.lastname@example.org.
ACTION Circulating Mayor Sign-on Letter
The Seattle Office of the Mayor and the ACTION Campaign are circulating a sign-on letter to mayors nationwide, calling on Congress to include provisions that support the Housing Credit in the next COVID-19 response package. The letter highlights that COVID-19 has exacerbated the U.S. affordable rental housing crisis, as developments nationwide are now “threatened due to significant financing gaps caused by the cuts to federal borrowing rates made in response to the pandemic.” It requests immediate consideration of 1) enacting a minimum 4 percent Housing Credit rate; and 2) lowering the “50 percent test” Bond financing threshold for 4 percent Housing Credit developments. Mayor Durkan is asking fellow mayors to join her in this call for strong federal support of affordable housing.
NCSHA and Novogradac Report
The National Council of State Housing Agencies (NCSHA), in partnership with Novogradac & Co., released an analysis on the projected impact of lowering the “50 percent test” Bond financing threshold for 4 percent Housing Credit developments on affordable multifamily housing production. Currently, multifamily developments financed with tax-exempt housing bonds are eligible to receive 4 percent Housing Credits if these bonds finance at least 50 percent of total project costs, including land. The analysis shows that lowering Bond financing threshold is projected to result in the production of additional Housing Credit units. For example, lowering the Bond financing threshold to 40 percent (when this tax-exempt debt is replaced by either additional taxable or recycled tax-exempt debt) would free up nearly $37.5 billion in bond authority over the next decade, resulting in the production of over 355,000 additional units. The report provides estimates of additional affordable homes if the bond test were to be lowered to 40 percent, 33 percent, or 25 percent.