Across the country, hundreds of affordable housing developments are on hold right now. Either for COVID-19 construction reasons or for financial feasibility reasons caused by the lower monthly floating percentage rate, or both, thousands of affordable units are seriously delayed. In late April, we sent out an email to developers around the country requesting basic information on 4% Housing Credit projects, including total number of units and reasons why they were stalled. In literally one day, we received information that totaled over 300 properties. These properties totaled 37,000 apartment units.
I am pretty sure this one-day survey was the tip of the iceberg as to the size of our problem. Delays are not the only issue. As borrowing rates have fallen to historic lows in response to the COVID-19 pandemic, the 4% credit rate has dropped so low (3.07%) it is now jeopardizing the future development of thousands of affordable homes and the construction-related jobs that produce them. That means even if we can fix the coronavirus-related construction issues, the funding gap is now too large to make transactions pencil out. This affects approximately 50% of the total Housing Credit production each year.
It was four long years ago that our housing champions in Congress introduced the 4% fix in the Cantwell/Hatch LIHTC expansion bill. For those of us involved in the state and federal effort to move the legislation forward, and for many of you who have been hearing about this for some time, it seems like a moving target that will never happen. I believe that it will happen because of two key facts. First, we have strengthened our presence and messaging on Capitol Hill in that four-year period, as well as back home in our states. And second, we should not forget that the latest version of the Affordable Housing Credit Improvement Act had more than half of the House of Representatives and one-third of the Senate as co-sponsors.
We also have a key ally in Ways and Means Chairman Richard Neal (D-MA), who believes in the value of the Housing Credit. He has been very vocal in his support, commenting in a recent hearing that we need to, paraphrasing, reinvest in our communities to strengthen our nation with programs like the Housing Credit. Just a few weeks ago Senate Finance ranking member Sen. Ron Wyden (D-OR) released an outline of “policies to preserve and expand affordable housing” that he plans to push, including the minimum 4% floor, an increase in the amount of 4% Housing Credits, and making the 30% “difficult to develop” basis boost available to more areas.
With the help of our Senate Republican champion Todd Young (R-IN), we now turn our attention to advocates in the states of Iowa, Idaho, Kansas, Wyoming, Texas, South Dakota, North Carolina, Nebraska, Ohio, Pennsylvania, South Carolina, Louisiana, Oklahoma, and Montana. These states have sitting Republican Senators on the Finance Committee, and our success in the next COVID-19 bill, the next infrastructure bill, or the next round of Tax Extenders legislation will require their support.
Find out the updated facts for your state, and let me know how you fare.
Your outreach and advocacy is needed!
Be well –
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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