On June 18, the House leadership, including Speaker Nancy Pelosi (D-CA), House Financial Services Committee Chairwoman Maxine Waters (D-CA), and House Ways and Means Chairman Richard Neal (D-MA), announced a $1.5 trillion infrastructure package, the Moving Forward Act (H.R. 2), which represents a merger of several bills into one massive package for roads and bridges, housing, education, clean air and water, broadband and more. At the press conference, where the ambitious House plan was revealed, Speaker Pelosi said that she anticipates the legislation would pass the House before the July 4 recess. A section by section summary of H.R. 2 is available here. The House is expected to pass the bill in the last week of June.
It was noted that Senate Leader Mitch McConnell (R-KY) has indicated the Senate will not consider such a package; however, Chairman Neal pointed out that even the President has called for a $2 trillion infrastructure package. Speaker Pelosi made the case that infrastructure has bipartisan support, pointing out that such a package has “tremendous interest” across the country and will create good paying jobs. The Speaker offered that members will be even more interested when they see the positive impacts of this package to their localities.
- The House announced a $1.5 trillion infrastructure package, the Moving Forward Act, including $70 billion for the Public Housing Capital Fund, but the Senate is unlikely to take up the bill this year.
- The Act includes billions for climate resiliency upgrades to public housing, CDBG, the Housing Trust Fund, HOME, Sections 202 and 811, the Capital Magnet Fund & rural housing.
- The Act also has provisions for LIHTC, including a minimum 4 percent credit, an increase in the 9 percent allocation amount, a lower threshold for bond financing (50 percent to 25 percent), and a 30 percent basis boost for projects deemed by state housing finance agencies to be located in difficult development areas.
- Important extensions for LIHTC include an extension of the deadline to expend 10 percent of basis from one year to two years, an extension of the minimum expenditure requirement period from 24 months to 36, a 50 percent boost for projects intended to serve extremely low income individuals.
- Important fixes to LIHTC include the elimination of the loophole that allowed owners to exit the LIHTC program before the affordability period expired and a prohibition on the consideration of local or elected official support or opposition or local government contributions in Qualified Allocation Plans.
Pressure will continue to mount for the Senate to consider this legislation. It has been reported that McConnell does not want to include infrastructure as part of a supplemental package related to COVID-19, a package that Senate Republicans have yet to draft while House Democrats have passed a $3 trillion HEROES Act. PHADA has heard numerous reports that it is unlikely the Senate will take up this bill this year and that there is little appetite for more than a standard infrastructure bill to address such traditional uses as roads and bridges.
Housing is Infrastructure/Investing in the Capital Fund
Most notably for public housing, it was announced that the legislation would include $70 billion for the Public Housing Capital Fund, which is incorporated from the Housing is Infrastructure Act of 2019, legislation previously introduced by Chairwoman Waters and endorsed by PHADA and other industry groups and members. Earlier in the year, House Democrats unveiled a five-year, $760 billion plan, “Moving Forward Framework”, to rebuild the nation’s highways, airports and other infrastructure. Disappointingly, this measure did not include housing as part of the plan. After significant advocacy by Chairwoman Waters and her staff, House leaders included housing needs in the legislation. The Chairwoman specifically thanked Rep. Peter A. DeFazio (D-OR), Chairman of the House Transportation and Infrastructure Committee, for its inclusion.
The legislation called for a distribution of capital funds at not less than 35 percent and not more than 75 percent under the same formula as FY 20. Based on feedback from some HAs and industry groups, including PHADA, committees involved are considering changing this to read not less than 75 percent by formula. There is also consideration of language that states that the remaining funds, which would be distributed to agencies through competition to address lead and other urgent health and safety concerns, could be distributed to agencies that are working in good faith to resolve violations from HUD, the Department of Environmental Protection and the Department of Justice.
Funding for Other Housing Programs
The Moving Forward Act also includes $1 billion for climate resiliency upgrades to public housing, $10 billion for a new competitive allocation of the Community Development Block Grant program,$5 billion for the Housing Trust Fund, $5 billion for HOME, $2.5 billion for the Section 811 Supportive Housing for Persons with Disabilities program, $2.5 billion for the Section 202 Supportive Housing for the Elderly program, $2.5 billion for the Capital Magnet Fund, $1 billion for the Native American Housing Block Grant, and $1 billion to address critical backlogs for 14,000 rural homes funded under Section 514 and 515.
Lack of Support for the Capital Fund in the Administration
When the President released his budget for FY 21 earlier this year, the Capital Fund was eliminated for the third straight year. This is problematic on its face, but also because it is detrimental to RAD conversions, where rents for the project are based on a formula derived, in part, from an agency’s operating and capital funding. PHADA, along with members of Congress such as Chair of the House Appropriations Committee David Price (D-NC), has long remarked that the Administration’s funding decisions that decrease the operating or capital funds are contradictory to its stated support for RAD.
The elimination of the Capital Fund would have a devastating effect on residents of public housing. PHADA has been advocating for capital fund backlog needs to be met for many years and worked closely with the staff of the House Financial Services Committee to provide analysis of the amount needed to address the backlog and to support critical funding. Tim Kaiser, Executive Director of PHADA was quoted in the official news release for the committee, “More than two decades of profound underfunding have been catastrophic for the nation’s public housing, resulting in a shrinking number of units and deteriorating physical conditions. PHADA is pleased to support this bill and to have provided analysis on the amount of critical funding necessary to address the underfunding of public housing capital needs. We appreciate the leadership of Chairwoman Waters on this measure.”
LIHTC Provisions in the Moving Forward Act
Advocates for LIHTC, including the ACTION Campaign, of which PHADA is a member, have been working for the last several years for a number of provisions to amend the tax code for Low Income Housing Tax Credits (LIHTC). These efforts have been accelerated due to the effects of COVID-19 on the housing market. While the CARES Act did not include any such provisions, the Moving Forward Act does. Many of these provisions were being sought under the Affordable Housing Credit Improvement Act (H.R. 3077/S. 1703). All of the provisions being sought by the ACTION campaign for COVID-19 relief were included in the legislation. Most notably these include:
- Minimum credit rate.
Establishes a permanent minimum 4 percent credit rate for projects using tax-exempt bonds to finance development for buildings receiving allocations or determinations and placed in service after December 31, 2019.
- Extension of period for rehabilitation expenditures.
Provides deadline relief for projects undergoing development by extending the minimum expenditure requirement period from 24 months to 36 months for rehabilitation projects receiving a LIHTC allocation after December 31, 2016 and before January 1, 2022.
- Extension of basis expenditure deadline.
Provides deadline relief for low income housing projects undergoing development by extending the deadline to expend 10 percent of basis from one year to two years after the date of the LIHTC allocation; applies to projects receiving an allocation after December 31, 2016 and before January 1, 2022.
- Tax exempt bond financing requirement.
Under current law, a low-income housing project may qualify for the 4 percent credit only if it is at least 50 percent financed by volume-capped tax-exempt bonds. This provision reduces the threshold from 50 percent to 25 percent, for buildings placed in service in taxable years beginning after December 31, 2019 and ending before January 1, 2022.
- Increase in state allocations.
Increases the annual 9 percent LIHTC allocation amount from $2.81 to $4.56 per capita and boosts the state private activity bond ceiling from $105 per capita to $135 per capita.
- Increase in credit for certain projects designated to serve extremely low income households.
Allows projects intended to serve extremely low income individuals to receive a 50% boost in their eligible basis for the project.
- Increase in credit for bond financed projects designated by housing credit agency.
Allows state housing credit agencies to designate projects financed with tax-exempt bonds to be treated as located in difficult development areas if the state housing agency determines the project would not otherwise be financially feasible; such projects are eligible for a 30 percent basis boost.
- Repeal of qualified contract option.
Closes the loophole that allows for termination of the qualified contract option to property owners who wanted to exit the LIHTC program before the period of affordability ends and limits the contract price of the property to Fair Market Value. (This is based on the Save Affordable Housing Act, S.1956/ H.R.3479. For more information on this issue, see the July 31, 2019 Advocate article.
- Prohibition of local approval and contribution requirements.
Prohibits the consideration of local or elected official support or opposition or local government contributions in Qualified Allocation Plans.
Other housing related tax highlights include:
- A provision to make the New Markets Tax Credit permanent at $5 billion beginning in 2022, with additional allocations to $7 billion in 2020 and $6 billion for 2021.
- An increase in the historic rehabilitation tax credit percentage from 20 percent to 30 percent for 2020 through 2024. The credit percentage is phased down to 26 percent in 2025, 23 percent in 2026, and returns to 20 percent in 2027 and thereafter.
On June 25, 2020, several Democratic senators introduced the Emergency Affordable Housing Act, which includes the same affordable housing provisions related to LIHTC as the Moving Forward Act. The legislation expands the 9 percent housing tax credit and establishes a permanent minimum 4 percent LIHTC rate. The bill’s sponsors include Sens. Maria Cantwell (D-WA), who is the sponsor of the Affordable Housing Credit Improvement Act of 2019 (S. 1703) and Ron Wyden (D-OR), the sponsor of the Save Affordable Housing Act of 2019 (S. 1956), along with Michael Bennet (D-CO) and Ben Cardin (D-MD). A one page summary of the legislation is available here. A detailed summary is available here.
PHADA urges its members to contact your Representatives in the House to vote in favor of the Moving Forward Act and to urge both of your senators to take up this important legislation in the Senate.