Last week, on September 9, the House Ways and Means Committee began marking up its portion of the Democrats’ Build Back Better reconciliation legislation. Late Friday, the Ways and Means Committee released a second tranche of legislative text from its Build Back Better reconciliation legislation, including the infrastructure financing and community development sections, which contain the committee’s Housing Credit proposals. Once reported by the Committee, the legislation will be combined with legislation being considered by other committees into a single bill, which will move under special “reconciliation” rules allowed by the $3.5 trillion budget resolution the House and Senate Democrats passed in August. Reconciliation allows legislation to pass the Senate with a simple majority vote.
In particular, ACTION was pleased to see the Ways and Means Committee included a number of key Housing Credit provisions from the Affordable Housing Credit Improvement Act (AHCIA) of 2021, H.R. 2573 and S. 1136, in the reconciliation bill text. The legislation represents the largest investment in the Housing Credit since its enactment in 1986. Specifically it includes:
Lowering the 50 percent bond financing threshold test to 25 percent for seven years (2022 to 2028) for buildings placed in service in taxable years after December 31, 2021.
Increasing the annual Housing Credit allocation by 60 percent, with a four-year phase-in (2022 to 2025). For calendar years 2026, 2027, and 2028, the Housing Credit volume cap will be the amount provided in 2025 with inflation adjustments for each year. The allocation increase includes in its baseline the 12.5 percent temporary allocation increase that would otherwise expire at the end of this year. The cap increase is inclusive of a 10 percent set-aside for developments in which at least 20 percent of the units are reserved for extremely low-income (ELI) households and rent restricted accordingly.
Providing up to a 50 percent basis boost for developments serving Extremely Low-Income (ELI) households for 10 years (2022 to 2031). Properties eligible for the basis boost are those in which 20 percent of the units are rent-restricted and available only to ELI households. States could devote no more than 15 percent of their Housing Credit authority and 10 percent of their private activity bond authority for such properties.
Allowing allocating agencies at their discretion to provide up to a 30 percent basis boost for properties financed with 4 percent Housing Credits and Multifamily Housing Bonds if needed for financial feasibility for 7 years (2022 to 2028).
Allowing allocating agencies to provide up to a 30 percent basis boost for developments in rural communities and Indian areas if needed for financial feasibility, effective for buildings placed in service after December 31, 2021. This provision would be a permanent part of the tax code.
The bill includes a provision to eliminate the qualified contract option for newly financed Housing Credit properties and modify the qualified contract price so that it is based on fair market value for the property as affordable. It also includes a provision to replace the nonprofit right of first refusal (ROFR) with a purchase option for newly financed properties and modify the statutory language related to ROFR for existing properties.
The Ways and Means Committee will continue its markup, focusing on the newly released provisions from Friday and the tax revenue raisers (or “pay-fors”) starting tomorrow. While this is still an initial step in the formation of the ultimate reconciliation package, it shows strong support from those charged with leadership on tax and puts Housing Credit in an excellent position moving forward.
ACTION will continue pushing for the enactment of the AHCIA-related provisions outlined above as the legislative package advances. We encourage members to reach out to your Representatives and Senators and ask them to weigh in with leadership on these critical provisions to expand Housing Credit production. Given the likelihood that Congress may need to reduce the size and scope of the overall package and major interests’ objections to the revenue raisers in the bill, Housing Credit advocates must weigh in often and loudly in support of these provisions. Please reach out to Krista D’Alessandro, email@example.com, if you need assistance with language or contact information for your advocacy outreach.