Gravel2Gavel Construction & Real Estate Law Blog
As 2019 winds down, the Affordable Housing Credit Improvement Act of 2019 is gaining momentum in Congress. The Act, which is aimed at expanding and strengthening the low-income housing tax credit, was originally introduced in 2016. The Consolidated Appropriations Act of 2018 adopted two key provisions of the original bill—a 12.5% increase to the housing credit ceiling for years 2018-2021 and the “income averaging” minimum set-aside election. The 2019 bill reintroduces many key provisions from the original bill, along with new provisions to further bolster the housing credit. As of the end of October, more than one-third of the House and one-fourth of the Senate have signed on to co-sponsor the bill. In summary, the key proposals in the 2019 legislation would:
- Establish a minimum 4% credit rate for tax-exempt bond financed transactions;
- Increase the housing credit volume cap by 50% over five years;
- Add income averaging as a third minimum set-aside test for 4% bond deals to mirror the modifications to Section 42 of the Internal Revenue Code adopted as part of the 2018 Consolidated Appropriations Act;
- Relax the over-income tenant regulations;
- Simplify the student housing rules to provide that households composed entirely of adult full-time students under the age of 24 are ineligible to live in housing credit properties, with exceptions for veterans, victims of domestic violence or sexual assault, single parents, formerly homeless youth and those aging out of foster care;
- Clarify and improve protections for victims of domestic violence and sexual assault living in housing credit properties;
- Amend the rules related to repair of a housing credit property after a casualty event to clarify that there is no recapture and loss of credits during the restoration period after the casualty, so long as the property is restored within a reasonable amount of time (not to exceed 25 months after the date of the casualty event);
- Revamp the rules related to nonprofit rights of first refusal and purchase options to allow nonprofit sponsors to more easily obtain full ownership of the property after expiration of the compliance period;
- Revise the related party rules related to acquisition credits on rehabilitation projects to incentivize preservation efforts;
- Allow capitalization of tenant relocation costs as part of rehabilitation expenditures;
- Remove the qualified census tract population cap and increase the difficult development area population cap to allow for the designation of more areas to be eligible for the 30% basis boost and add an option to provide up to a 30% basis boost for bond-financed deals that are not located in a qualified census tract or difficult development area;
- Provide up to a 50% basis boost (to the extent needed for financial feasibility) for projects serving extremely low-income and homeless tenants in at least 20% of the apartment units; and
- Create investment incentives that would benefit Native American communities, rural residents, and veterans.
If passed, the proposed legislation would increase the number of affordable units produced over the next decade by an estimated 550,000 units and would benefit several underserved populations. Affordable housing proponents are encouraged by the level of Congressional support for this bill, which is one of only a few tax bills with similar levels of backing. The current deadline for passage of the 2020 appropriations plan is November 21, although if agreement is not reached by that time, Congress may pass a stopgap spending bill to allow more time to reach agreement on 2020 appropriations and avoid a government shutdown.