Industry Insights
A whole-of-government approach to housing
By Kaitlyn Snyder
5 min read
“The President believes that policies that boost the supply of affordable housing are critical to easing the burden of rising housing costs for renters and aspiring homeowners and must be taken in combination with actions that address near-term housing affordability and promote fair housing.” – October 7, 2022 White House Press Release.
Housing, at long last, has taken center stage in federal policy. The housing shortage that existed long before Covid was magnified during the health-turned-economic crisis, and we saw just how financially precarious far too many households are. Federal Reserve data indicates that about 35 percent of adults would have trouble paying an unexpected $400 expense, while 12 percent said they would be unable to pay the expense by any means.
Since then, we’ve seen a steadily rising drumbeat of support for affordable housing. Take the extraordinary passage of Emergency Rental Assistance and the Homeownership Assistance Fund. Both the Bipartisan Infrastructure Law and the Inflation Reduction Act include provisions aimed at housing. And we’re still hopeful that more housing provisions will be included in a year-end package.
Beyond Congress, last month the administration released a press release detailing its progress in implementing its Housing Supply Action Plan. The document itself is remarkable – never have we seen so much support for housing from an administration. The Plan and progress update detail a whole-of-government approach to preserving and creating new affordable housing. I encourage you to read the document in its entirety, and highlight key components below:
Department of the Treasury/Internal Revenue Service
The IRS issued the long-awaited Average Income Test (AIT) final regulations (read more in IRS Publishes Revised Average Income Regulations for LIHTC). NH&RA submitted comments to the IRS and is pleased to see many of our suggestions in the final rule. Notably, the new regulations allow an owner to meet the AIT if at least 40 percent of a building’s units collectively average 60 percent or less of area median gross income, as opposed to all the low-income units. In doing so, the new regulations remove the so-called “cliff” by limiting the impact of a unit going out of compliance to just that unit instead of causing the whole building to fail the AIT. This change brings the AIT regulations in line with 20/50 and 40/60 properties. The new regulations also allow owners to redesignate units and are required to report any changes to their housing finance agency.
The IRS also extended Placed-in-Service deadlines by one year for allocations starting in 2019 (read more in CohnReznick’s Select LIHTC Deadline Extensions Updated).
Department of Housing and Urban Development
A new guide from the Department of Housing and Urban Development, Increasing the Supply of New Affordable Housing: Quick Guide to Using HUD’s Community Planning and Development (CPD) Programs, details funding sources available for affordable housing and provides case studies. The guide primarily focuses on CPD funding within HUD, but also covers funding sources, like Low Income Housing Tax Credit, Rental Assistance Demonstration and the Federal Housing Finance Agency’s Affordable Housing Program.
Department of Transportation
The Bipartisan Infrastructure Law (BIL) expands the Transportation Infrastructure Finance and Innovation Act program to provide low-cost, long-term financing for Transit-Oriented Development. Eligible projects can borrow up to 49 percent of eligible project costs, up from 33 percent. Housing is specifically called out as an eligible activity in section two: “economic development, including commercial and residential development and related infrastructure and activities.”
Department of Energy
The BIL also includes a tenfold increase to the Weatherization Assistance Program’s (WAP) budget. The $3.2 billion is expected to help 450,000 households, compared with the 38,000 homes per year it serves today. This funding has typically been used for single-family housing; however, more and more states are using the funding for multifamily housing as well. The funds flow through state, local and tribal organizations, all in need of educating about the use of WAP funds for multifamily housing.
The Inflation Reduction Act includes increases and changes to the Investment Tax Credit (ITC),179D –Commercial Building Energy-Efficiency Tax Deduction and 45L – New Energy Efficient Home Credit.
• ITC – allows for a 30 percent credit (instead of the previous 26 percent) for all systems placed in service after Dec. 31, 2021, through the end of 2032. Ten percent bonus credits can be obtained through the following means:
- Using domestic materials;
- Being in an energy community, which includes brownfield sites, areas that meet certain employment percentages relating to coal, oil or natural gas and areas in which a coal mine or coal-fired electric generating plant has closed;
- Being in a low-income community; and/or
- Low-Income Residential Building or Low-Income Economic Benefit Project.
• 45L – extends the new energy-efficient home credit for ten years and no longer reduces basis for LIHTC properties; and
• 179D – makes the deduction easier to access for multifamily housing.
NH&RA and our partners look forward to implementing these new changes as they make their way through the regulatory process and funding becomes available for affordable housing.
