House Committee Advance Affordable Housing Legislation
On September 14, the House Financial Services Committee approved legislation that would provide $327 billion for affordable housing as part President Biden’s $3.5 trillion infrastructure and economic recovery package. Specifically, the Committee approved increased investments and resources for affordable housing and rental assistance programs, including:
Project Based Rental Assistance: Providing $15 billion for the PBRA program. This funding will support the first new PBRA contracts funded in nearly four decades, and the Committee estimated that this investment will assist over 260,000 units. The Committee also approved $4 billion to preserve and improve safety conditions in properties receiving Section 8 project-based rental assistance.
Section 811: Providing $1 billion for Section 811 to help for persons with disabilities to live independently in integrated housing settings with community-based support and services. This investment will provide assistance to over 111,000 units. HUD’s Worst Case Housing Needs: Report to Congress states that over 1.3 million very low-income renter households paying more than half of their income in rent or living in substandard housing included one or more non-elderly people with disabilities.
Section 202: Providing $2.5 billion for the 202 Supportive Housing for the Elderly programs and would create over 37,500 units that will enable seniors to continue live independently and with dignity.
Housing Choice Vouchers: Providing $75 billion to fund incremental Housing Choice Vouchers. Of this amount, $24 billion is targeted to individuals and families experiencing or at risk of homelessness, and survivors of domestic violence, dating violence, sexual assault, stalking and human trafficking.
Public Housing: Providing $77.25 billion to fully address the capital needs backlog of public housing. The Committee also approved $2.75 billion in grants structured to be similar to the Choice Neighborhood Initiatives Program, a place-based grant program that supports communities develop and implement locally driven comprehensive to transform underserved neighborhoods into thriving communities with greater economic opportunity for all residents. This Committee estimates that this investment for Choice Neighborhoods will enable communities to redevelop nearly 16,000 units of distressed public and HUD-assisted housing.
HOME: Providing $35 billion for the HOME Investment Partnerships Program to fund the construction, purchase, or rehabilitation of affordable homes for low-income people. This investment will create or rehabilitate over 250,000 units, provide rental assistance to over 134,000 low-income families, enable over 73,000 low-income families to repair their homes, and move over 151,000 families into sustainable homeownership.
Housing Trust Fund: The Committee also approved a set-aside of $37 billion for activities under the national Housing Trust Fund to support the preservation and creation of over 330,000 new rental homes affordable to the lowest income households. No more than 10% of the funds can be used to support homeownership activities, and no more than 15% can be used for administrative and planning costs.
For both the HOME program and the Housing Trust Fund, the Committee waived the commitment deadline, matching requirements, and set-aside for Community Housing Development Organizations (CHDOs). The Committee also approved letting the HUD Secretary to recapture “certain amounts remaining available to a grantee…or amounts declined by a grantee” and reallocate funds to other grantees to ensure fund expenditure, geographic diversity, and the availability of funding to communities within the State from which the funds have been recaptured. The HUD Secretary may also waive any or specify alternative requirements or regulations, other than requirements related to fair housing, nondiscrimination, labor standards, and the environment, if necessary to expedite or facilitate the use of funds.
Rural Housing: Providing $4.8 billion to carry out new construction, make improvements to energy and water efficiency or climate resilience, to remove health and safety hazards, and to preserve housing under the Section 515 Rural Rental Housing and Section 514/516 Farm Labor Housing programs. This section would also provide additional rural rental assistance to eligible households. The Committee estimates this investment will preserve over 89,000 units.
Energy Efficiencies: Providing $7 billion to establish a grant program for owners of federally assisted housing affordable housing to make energy efficiency upgrades, including electrification of systems and appliances, and installation of renewable energy types and resiliency. This investment will retrofit or otherwise upgrade over 92,000 HUD-assisted units.
A full House vote on this bill is expected in the coming weeks, after which it will need to be approved by the Senate. To view the full House Financial Services Committee mark-up hearing on the proposed funding priorities, click here.
House Ways and Means Committee Approves Investments for Development and Construction of Affordable Housing
On September 15, the House Ways and Means Committee approved legislation that includes $1.2 trillion worth of tax investments as part of President Biden’s $3.5 trillion infrastructure and economic recovery package. Specifically, the Committee approved increased investments for the affordable housing preservation and new construction. This includes:
Increasing Annual Housing Credit State Allocations: This provision increases the 9% housing credit and the small state minimum by 50 percent and phases in this increase over five years. In calendar years 2026 through 2028, the amounts are adjusted for inflation. The increases include the 12.5% expansion in the 9% housing credit passed in 2018. The provision is effective after December 31, 2021.
Reducing Tax-exempt Bond Financing Requirement: This provision temporarily reduces the 50% requirement to 25%, to enable housing credit deals to unlock more 4% credits. The provision is effective for buildings financed by the proceeds of certain tax-exempt bonds issued in calendar years 2022–2028 (and not financed by previous bonds issued in tax years 2019-2021) for buildings placed in service in taxable years after December 31, 2021.
Basis Boosts for Buildings Designated to Serve Extremely Low-income Households: This provision provides a 50% basis boost for LIHTC buildings that designate at least 20% of their occupied units for extremely low-income tenants and limit rent to no more than 30% of the greater of: 30% of area median income or the federal poverty line. The provision is funded by a set-aside equal to 10% of a state’s housing credit allocation (and the set-aside is in addition to this allocation). Certain buildings eligible for the 10% set-aside are also eligible to receive an enhanced low-income housing tax credit. The enhanced credit provision applies to LIHTC buildings receiving either the 9% or 4% housing credit. For purposes of the 9% credit, however, a housing credit agency may not allocate more than 15 percent of the portion of the state’s housing credit ceiling amount to such buildings after the date of enactment. Furthermore, for purposes of the 4% credit, a state may not issue more than 10% of its private activity bond volume cap to such buildings. The enhanced credit terminates after December 31, 2031. The provision is effective for allocations and determinations of housing credit dollar amount after December 31, 2021.
Inclusion of Rural Areas as Difficult Development Areas (DDAs): This provision gives states the ability to provide up to a 30 percent basis boost to properties in rural areas if needed for financial feasibility, by qualifying rural areas as Difficult Development Areas. Rural areas are defined as any nonmetropolitan counties or any rural areas designated in a state’s qualified action plan and defined by Section 520 of the Housing Act of 1949. This would allow these developments to receive more housing credit equity than would otherwise be available to them. The provision applies to buildings placed in service after December 31, 2021.
Increase in Credit for Bond-financed Projects Designated as DDAs: This provision modifies the rule which treats as difficult development areas for purposes of determining eligible basis, those buildings designated by housing credit agencies as requiring an increase in credit. Under the proposal, buildings so designated and financed with the proceeds of certain tax-exempt bonds are treated as difficult development areas for purposes of determining eligible basis as long as the determinations of housing credit dollar amounts are not made after December 31, 2028.
Repeal of Qualified Contract Option: This provision eliminates the qualified contract exception for buildings receiving allocations after January 1, 2022. Specifically, the provision limits the use of the exception to:
- Buildings that received housing credit allocations before January 1, 2022, or
- With respect to buildings financed with tax-exempt bonds, buildings that received before January 1, 2022 a determination from the issuer of the tax-exempt bonds or the housing credit agency that the building has satisfied the QAP requirements and the financial feasibility determination. In addition, for buildings that may still make use of the qualified contract exception, the proposal modifies the specified statutory price. The price for any non-low-income portion remains the fair market value. The price for the low-income portion is the fair market value, determined by the housing credit agency considering the rent restrictions required to continue to satisfy the minimum set aside requirements. The Secretary is directed to prescribe regulations necessary or appropriate to the determination of the specified statutory price.
Right of First Refusal Option Safe Harbor: This provision changes the right of first refusal safe harbor into an option safe harbor. For existing agreements, the provision clarifies, for purposes of the safe harbor, that the right to acquire the building includes the right to acquire all the partnership interests relating to the building. It also clarifies that the right to acquire the building includes the right to acquire assets held for the development, operation, or maintenance of the building. Thus, agreements which provide for the right to acquire these partnership interests or building assets do not fail to satisfy the safe harbor. For existing agreements, the provision also clarifies that the right of first refusal safe harbor may be satisfied by the grant of an option. A right of first refusal may be exercised in response to an offer by a related party; a bona fide third-party offer is not needed. A right of first refusal may be exercised without the approval of any owner of a credit project. Thus, agreements with these terms do not fail to satisfy the safe harbor. Finally, the provision amends the minimum purchase price to exclude exit taxes. Thus, agreements that do not include exit taxes as part of the minimum purchase price do not fail to satisfy the safe harbor.
New Neighborhood Homes Tax Credit: This provision establishes a new federal tax credit to encourage the rehabilitation of deteriorated homes in distressed neighborhoods. States would receive Neighborhood Homes Investment Act (NHIA) tax credit authority and administer and allocate credits on a competitive basis. NHIA tax credits would be used to cover the gap between development costs and sales prices, up to 35 percent of eligible development costs. Rehabilitated homes must be owner-occupied for investors to receive the credits. Homeowners must be below certain income limitations, sales prices are capped, and qualifying neighborhoods must have elevated poverty rates, lower incomes, and modest home values. Special rules apply to rehabilitations that occur when homes are already owner-occupied prior to and during such rehabilitation. This provision applies to taxable years beginning after December 31, 2021.
Other tax applicable provisions approved by the Ways and Means Committee include:
Corporate Tax Rate Increase: This provision would replace the current flat 21% corporate tax rate with a graduated rate, starting at 18% on the first $400,000 of income; 21% on income up to $5 million; and 26.5% on income above $5 million. However, the graduated rate would phase out for corporations making more than $10 million.
Increase in Top Marginal Individual Income Tax Rate: This provision increases the top marginal individual income tax rate to 39.6%. This marginal rate applies to married individuals filing jointly with taxable income over $450,000, to heads of households with taxable income over $425,000, to unmarried individuals with taxable income over $400,000, to married individuals filing separate returns with taxable income over $225,000, and to estates and trusts with taxable income over $12,500. This would apply to taxable years beginning after December 31, 2021.
Increase in Capital Gains Rate for Certain High-income Individuals: This provision increases the capital gains rate to 25%. from 20% for certain high-income individuals, short of the 39.6% proposed by President Biden to equalize the taxation of investment and wage income. A 3.8% Affordable Care Act tax on investment would then be added on top, meaning the wealthiest individuals would pay a 28.8% federal rate on realized investment returns.
High-income Surcharge: This provision creates a new 3% surtax on individuals with modified adjusted gross income exceeding $5 million ($2.5 million for a married individual filing separately), a provision not included in the president’s proposals. This is proposed to be effective for tax years beginning after December 31, 2021.
The full House is expected to vote on the final $3.5 trillion bill in the coming weeks. Following approval in the House, the bill would then go to the Senate for further consideration. To view the full House Ways and Means Committee mark-up hearing on the proposed affordable housing investments, click here.
President Nominates Housing Experts to Key Positions at Ginnie Mae and PIH
This week, the Administration announced President Biden plans to nominate Alanna McCargo to be the next president of Ginnie Mae, and Arthur Jemison to be assistant secretary for Public and Indian Housing.
Alanna McCargo currently serves as Senior Advisor for housing finance at HUD. Her career in housing centered on how America’s housing finance system can equitably provide credit and capital to households and affordable housing stakeholders. She joined the Biden-Harris Administration after serving as Vice President of the Housing Finance Policy Center at the Urban Institute, a social and economic policy research firm where she led and developed research programming in collaboration with key housing industry, nonprofit, and government agencies to support housing policy research. Her work focused on reducing racial homeownership gaps, increasing housing affordability, and reducing barriers to accessing credit and capital. Ms. McCargo also served as Executive Director of the Mortgage Servicing Collaborative, a cross-sector initiative that identified and developed policy recommendations for mortgage servicing and securitization reforms to enable a more stable housing finance system. Ms. McCargo also held roles as Vice President and Head of Government Solutions with CoreLogic, a property and mortgage data analytics firm, and as Vice President with JP Morgan Chase’s Home Lending division and spent 10-years at Fannie Mae, where she led policy development and secondary mortgage market programs and had leadership roles on key corporate initiatives. From 2008 through 2012 she served as Senior Director of Servicing Portfolio Management and played a central role in the partnership with the US Department of Treasury in executing the Emergency Economic Stabilization Act of 2008. She was instrumental in foreclosure prevention efforts, loan restructuring, and distressed asset management programs and was a leader in the work with the Federal Housing Finance Agency on Fannie Mae and Freddie Mac mortgage servicing alignment efforts.
James Arthur Jemison II (Arthur) is currently the Principal Deputy Assistant Secretary for the Office of Community Planning and Development at HUD. Mr. Jemison joined HUD in January 2021 from the City of Detroit, where he was Group Executive for Planning, Housing & Development, leading the City’s development agenda, working in partnership with Directors of the Housing & Revitalization Department, the Planning & Development Department, the Detroit Land Bank Authority, Detroit Housing Commission (Public Housing Authority). In early 2014, he served as Director of the new Housing & Revitalization Department for the City of Detroit as the City recovered from bankruptcy. Before coming to Detroit, Mr. Jemison served as Deputy Undersecretary and Deputy Director for the Department of Housing and Community Development for the Commonwealth of Massachusetts under Governor Deval Patrick. Prior to that, Mr. Jemison held a variety of public- and private-sector leadership positions in planning, development and public housing, primarily in Massachusetts and the District of Columbia.
Both nominations will require Senate approval and confirmation hearings are expected in the coming weeks.