On January 30, 2024, the House passed the Tax Relief for American Families and Workers Act (H.R. 7024) with significant bipartisan backing, with a final vote of 357-70. One component of this legislation, outlined in Title V, introduces amendments to two provisions aimed at increasing the ability of State Housing Finance Agencies to enhance their capacity to finance more affordable housing communities.
One provision involves lowering the minimum aggregate basis threshold necessary for projects to be eligible for 4% Low-Income Housing Tax Credits (LIHTCs). As it stands, Section 42(h)(4)(B) mandates that at least 50% of the aggregate basis must be financed through Tax-Exempt Bonds for a project to qualify for 4% LIHTC Allocation.
The proposed change would allow a project to qualify for 4% credits if the aggregate basis financed with bonds is at least 50% or 30% for projects financed with Bonds with an issue date before 2026 that are placed in service after 2023.
This proposed adjustment is expected to broaden project eligibility for a 4% LIHTC Allocation, increasing the viability of more projects. This is particularly critical given that some state housing finance agencies have imposed a maximum bond threshold of 55%. This has presented challenges for developers in ensuring that bond financing meets the minimum requirement without exceeding the upper limit.
Additionally, the bill proposes an extension of the 12.5% increase in the State housing credit ceiling for the years 2023, 2024, and 2025, a continuation from its previous application in the calendar years 2018 through 2021. This increase, applied to the cap following annual cost of living adjustments as outlined under Section 42(h)(H), aims to further stimulate affordable housing development.
This legislation has now been forwarded to the Senate for their consideration and vote. Senator Crapo (R-ID), who is on the Senate Finance Committee described the framework for the bill as a “thoughtful starting point,” and “I look forward to working with my colleagues to vet the legislation, address concerns, and make the necessary changes to build support.”
Bipartisan support in Senate appears positive and widespread. The provisions outlined in the bill are poised to significantly increase the stock of affordable housing, which is desperately needed.
