Senate Finance Chair Proposes Bill Closing LIHTC Loophole
Though the eviction moratorium and the pandemic-driven rent crisis from which it sprung may be the most pressing issues facing the country's low-income renters, the housing affordability crisis in the U.S. is a long-term issue that is getting worse every year.
Sen. Ron Wyden, chair of the Senate Finance Committee, has proposed a bill that would strengthen the Low-Income Housing Tax Credit, one of the most popular methods by which affordable housing units are created and preserved, WBUR reports. The bill, part of Wyden's proposed Decent, Affordable, Safe Housing Act, would make an administrative tweak to a component of LIHTC regulations that housing advocates say is manipulated by investors prioritizing returns over affordability.
Part of the LIHTC includes an incentive for developers and owners to include a nonprofit partner in a property's ownership structure. After the mandated 15-year period of keeping units in that property affordable, the nonprofit partner then has a right of first refusal to purchase the property for a combination of the debt and property taxes. The structure of that right has allowed investors with equity interests or those who purchase tax credits from lenders to deny nonprofits that opportunity in favor of assuming full ownership or selling a property at market rate — often dooming the affordability of those properties.
Wyden's bill would change the right of first refusal to a simple option for nonprofits, which would then be able to assume ownership of LIHTC properties for the low-cost option without requiring consent from for-profit partners, WBUR reports. A summary of the bill released by Wyden's office says the change "preserves tens of thousands of affordable units by closing a key loophole."
The DASH Act also includes provisions that would expand the LIHTC program at both its 9% tranche for deeply affordable properties and the more common 4% tranche for what is commonly referred to as workforce housing. It would also create a Middle-Income Housing Tax Credit for properties renting to households making 60% to 100% of area median income worth 50% of the present value of construction costs or 5% annually, according to the summary from Wyden's office.
Another portion of the DASH Act would create a new tax credit for landlords who rent to tenants making 30% or less of AMI worth 110% of the difference between market-rate rent and utilities and 30% of the tenant's income, Wyden's office said in its summary.