Legally Speaking
Federal Affordable/Workforce Housing Legislation Déjà Vue
By Hollie Croft, Nick Heckman & David Leon
5 min read
Year after year, over and over again, federal legislation is proposed to support the development of affordable or workforce housing; and every year, just like the year before that…and the year before that…bill after bill is introduced by the House or Senate (or both) just to sit there. It sits and we wait for nothing to happen and for the bill to be reintroduced the very next year with the same result. You, like us—every year, and time and again—constantly read through these lengthy bills and diligently inform your clients about the new and exciting legislation floating around in the federal legislation abyss for it to go nowhere.
Currently afloat in the aforementioned federal legislation abyss is a bipartisan bill that was introduced this past December by both the House and Senate that would create a tax credit supporting workforce housing. Sound familiar? No, it is not the Affordable Housing Credit Improvement Act, nor is it the Decent, Affordable, Safe Housing for All Act (otherwise known as the DASH Act). And no, it is not that one bill [insert the name of your choosing] with that one provision that would drastically help alleviate that little thing that keeps popping up on whatever news station you are watching regarding that little area of national concern surrounding national housing affordability.
Ok, I will stop exaggerating and being facetious and get to the point. The proposed legislation is called the Workforce Housing Tax Credit Act (WHTC Act) and is built off of the successes of the Low Income Housing Tax Credit (LIHTC) program by providing tax credits to project owners who build housing for tenants with 100 percent area median income (AMI) or less and where the rents are restricted to 30 percent of the designated income (middle-income units).
As a quick refresher, in the LIHTC program, generally, tax credits are provided to project owners over ten years starting the taxable year the project is placed in service. LIHTC projects are subject to a 15-year compliance period, which such affordability restrictions generally remain in place after the expiration of such compliance period for an additional 15 years, or a “second” period called the extended use period, totaling a 30-year affordability period for a LIHTC project. The required affordability restrictions under the LIHTC program typically require that either 20 percent of the units in the project are rented to individuals at or below 50 percent AMI, or 40 percent of the units in the projects are rented to individuals at or below 60 percent AMI. These restricted units’ rents are then restricted to an amount not to exceed 30 percent of the designated income level of such units.
Similar to the LIHTC program, the WHTC Act would provide Workforce Housing Tax Credits to project owners over 15 years (different than the LIHTC ten-year credit period) with a 15-year compliance period, as well as an additional 15-year extended use period; totaling a 30-year affordability period. The WHTC Act requires that at least 60 percent of the units must be occupied by individuals at or below 100 percent AMI. The units’ rents—like the LIHTC program—are restricted to an amount not to exceed 30 percent of the designated income. Lastly, the WHTC could be combined with LIHTC for different units, as long as at least 20 percent of the total units are middle-income units.
Amazing right? You may be thinking to yourself, ‘I recall reading in the introduction, that something similar to this has happened before.’ This is what your English teacher would have hinted at as possible foreshadowing. We hope this legislation does not suffer a repeat of the same fate that the prior years’ proposed legislation did. With any luck, this will be the bill that finally makes its way through Congress and to the President’s desk to be signed into law.
Nevertheless, not all legislation needs to be passed by the federal government. Thankfully, we have state governments who have decided to stop waiting on the federal legislation to address the very real issue of the lack of affordable or workforce housing in their state and have taken action. (See Cooperation, Innovation and Thought.) For example, Florida recently passed the Live Local Act, which provides property tax exemptions to project owners who rent units to tenants at or below 120 percent AMI. Michigan launched its Missing Middle Housing program, which seeks to increase the supply of workforce housing to support the growth and economic mobility of employees by providing grant funds to developers thereby defraying the cost of construction and rehabilitation of properties specifically targeted to households in the 60 to 120 percent AMI demographic. And California has its Community Improvement Authority Workforce Housing program, which provides government bonds to acquire market-rate apartment units to convert them into households that support those earning 120 percent AMI and under. All of which could be used alongside federal legislation if it were ever to be passed.
As we wait for the federal government to pass the bill, states are continuing to offer exciting new laws and legislation, which are creating opportunities for developers that were otherwise never available, or simply did not exist until recently, to further increase or support workforce housing. So, instead of simply watching the proposed federal legislation grow old and wither away, check and see if your local or state government has not already created an opportunity for you to build much needed workforce housing today.
