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The House of Representatives Wednesday passed a roughly $78B tax package that includes a significant boost to the availability of and eligibility for tax credits commonly used to fund affordable housing projects.
The Tax Relief for American Families and Workers Act of 2024 would reinstate a 12.5% low-income housing tax credit ceiling for 2023 through 2025, allowing states to allocate more credits for affordable housing projects, even retroactively in some cases.
"This provision restores the 12.5% increase in 9% allocations for CY 2023 through CY 2025 and is effective for taxable years beginning after Dec. 31, 2022," according to accounting and consulting firm Novogradac & Co.
It would also lower the threshold of state and local tax-exempt bond financing a project has to receive for its developer to qualify for the maximum credits to 30% instead of the current 50%, the New York Times previously reported.
The bill includes a host of other impacts, notably changes to child and business tax credits, which would be in effect for 2024 and 2025 if the bill gets all needed approvals.
The Mortgage Bankers Association applauded the House’s vote, noting that “the enhancements to the LIHTC program will improve the supply and [affordability] challenges in the rental market by producing an estimated 200,000 additional rental units over the next two years,” the MBA said in a statement.
The bill’s affordable housing provisions “would have a profound effect on affordable housing development and would likely make up the largest increase in affordable rental housing resources since 2000,” according to Novogradac. The firm also provided the 200,000-unit estimate being touted to show the potential impact of the legislation.
The legislation comes as many states across the country face housing affordability issues, especially for their poorest residents. Between 2019 and 2021, the shortage of homes affordable for and available to extremely low-income renters grew from a deficit of 6.8 million to a shortage of 7.3 million, “continuing a long-term trend of diminishing supply,” according to the National Low Income Housing Coalition. Those renters in Nevada, Oregon, Florida, California, Arizona and Texas faced the most intense shortages, the coalition found.
The changes relating to the LIHTC are estimated to cost $6.2B over 10 years, the New York Times previously reported.
The bill secured broad bipartisan support in the House, passing with a 357 to 70 vote. But it heads now to the Senate, where it, despite some vocal supporters for its affordable housing elements, could face pushback. Some Republicans in the Senate have called for hearings on the bill and are eager to make changes to it, Politico reported. It’s unclear whether the low-income housing tax credit portions of the bill are of particular focus for those who seek to change it.
The Senate is scheduled to recess starting Feb. 12 and is not expected to consider the bill before then, The Wall Street Journal reported.
CORRECTION, FEB. 5, 11:04 A.M. PT: A previous version of this story misstated the time frame in which the Senate will be on recess. The story has been updated.
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