Bipartisan Push to Expand Housing Credit in Year-End Legislation
This week, Representatives Suzan DelBene (D-WA) and Brad Wenstrup (R-OH) led 54 members of Congress, nearly evenly split between Republicans and Democrats, in urging House leadership to address the nation’s growing affordable housing shortage. In a letter sent to Congressional leadership, the lawmakers requested provisions that would strengthen and expand the Low-Income Housing Tax Credit (Housing Credit) be included in a potential year-end tax bill to increase affordable housing production and lower costs for American families. In the letter, the lawmakers explained how the Housing Credit is the most effective and successful tool for building and preserving affordable housing. Since its creation in 1986, the program has financed more than 3.6 million affordable housing units —nearly 90 percent of all federally-funded affordable housing during that time. The letter calls on House Leadership to include two provisions from the bipartisan Affordable Housing Credit Improvement Act (AHCIA) that would increase affordable housing production:
- Extend the 12.5 percent Housing Credit allocation that expired at the end of 2021. These resources can be deployed immediately allowing ready-to-go developments to move forward.
- Lower the “50 percent test” to 25 percent to increase Housing Credit access. This would allow all states to more efficiently use their Private Activity Bond cap and unlock resources for states to complete hundreds of thousands of additional shovel-ready developments.
The ACHIA provisions outlined above would build or preserve more than 1.5 million additional affordable homes. “We cannot ignore this crucial area of our economy, and the working families, veterans, seniors, and low-income families who will be able to afford their homes during this time and in the years ahead because of the Housing Credit. By enacting these provisions, we can have a huge, positive impact on affordable housing production,” the lawmakers wrote. NAHMA supports the AHCIA and will continue to monitor these efforts closely.
To view Rep. DelBene’s letter, click here.
House Hearing Examines Impact of Inflation on Affordable Housing
This week, the House Financial Services Committee held a hearing titled “The Need for Bold Investments in Fair and Affordable Housing to Combat Inflation.” The hearing highlighted the persistent shortfall in the supply of housing units in recent years, along with corresponding increases in the costs to access available housing, which have contributed to a nationwide housing affordability crisis that has only been exacerbated by the pandemic and corresponding economic trends. Witnesses testifying before the full committee included Nikitra Bailey, Executive Vice President of the National Fair Housing Alliance; Mark Zandi, Chief Economist at Moody’s Analytics; Margaret Eaddy, Activist and Housing Seeker; former Congressional Budget Office Director Douglas Holtz-Eakin, President of the American Action Forum; and Michael Mitchell, Director of Policy and Research at the Groundwork Collaborative.
Chairwoman of the Committee, Rep. Maxine Waters (D-CA), detailed how the underproduction of homes that are affordable to the lowest income households has led to an absolute shortage of 3.6 million homes for extremely low-income renters—the only subset of households experiencing an absolute shortage of housing. She underscored how the chronic and growing lack of supply to meet demand has contributed to inflation in the housing market, with real average new home prices rising by approximately 88% from 1981 to 2021, after controlling for inflation, and real median new home prices rose by 93% over the same period. Between 2019 and June 2022 alone, house prices increased by 48% nationally and the national median asking rents increased by 31% during that same time. The Chairwoman also described how wage growth, which has increased by 23% in the past, has not kept up over the past five years with the 36.9% increase in rents.
Discussing the rapid increase in inflation, Rep. Ayanna Pressly asked witnesses if they agreed that the limited supply of affordable housing is the root cause of housing inflation. “Absolutely, Congresswoman.” testified Mr. Mitchell. “Many folks in the housing advocacy space say the rent eats first. And what this means is housing, as the single largest budget item for households and for low-income families accounting for almost half of their budgets – it means that they have that much harder of a time when rents increase of making ends meet and become that much closer to eviction and homelessness. And this is especially true for Black and brown renters, or roughly one in five Black renters last month, reported that their household was behind on rent payments. So it’s absolutely imperative that we address the housing affordability crisis,” he said.
Rep. Carolyn B. Maloney (D-NY), senior member of the committee and co-author of the Affordable Housing Preservation Act, underscored the negative impact on homeowners and renters as they deal with the impact of rising interest rates. She described how the raising of interest rates have worsened affordability for home buyers and homeowners, and even renters. For example, between April 2021, and April of this year, mortgage rates increased by nearly two basis points, and the median home price rose by over $50,000. The monthly cost of home ownership which includes a monthly payment on a 30-year mortgage, property taxes, property insurance, mortgage insurance grew by at least $500 a month, but in some cases in metropolitan areas it’s grown by over $1,000 a month.
Members also discussed the possibility of creating a 50-year mortgage to lower the rate and allow people who are confronting constrictions in their income to afford homeownership. When asked, Mr. Zandi stated that he didn’t know if a 50-year mortgage would advance the ball only because the typical American household lives in their house for no more than ten years. “So very, very few people would actually live in that house over that period of time. What I would do though is throw out another idea, assumability of mortgages. Right so you get a mortgage at a lower mortgage rate, and when you move you can take that mortgage with you. FHA has some mortgages like that. That might be an idea that would be very helpful in helping insulate the housing market and homeowners and improving affordability in the longer run.”
To view the full committee hearing, click here.