WASHINGTON March 22nd, 2023 – The White House budget proposal seeks a major increase to the low-income housing tax credit (LIHTC) program.

The fiscal 2024 plan calls for a $28 billion expansion in LIHTCs over 10 years as well as lowering the 50% bond test to 25%.

Under the Biden administration proposal, each state would receive $4.25 per capita in new potential credits for allocation, with a small state minimum of $4,901,620 in 2024. For 2025, the amounts would increase to $4.88 and $5,632,880. For 2026 and subsequent years, the amounts would be the same as the prior year and indexed for inflation.

The latest budget plan also calls for lowering the bond test, a move that’s been a priority for many LIHTC advocates. Under the budget plan, a building would be eligible to earn LIHTCs on the basis of 25% private-activity bond financing of the building and land. This change from 50% would apply to buildings placed in service in taxable years beginning after Dec. 31, 2023.

In addition, President Joe Biden is proposing to repeal the qualified contract provision from the date of enactment. It also seeks to repeal the “right of first refusal” safe harbor and replace it with a purchase option, saying “LIHTC investors have imposed hurdles to the use of ROFRs that allow LIHTC projects to be too easily converted to market-rate housing.”

The overall $6.8 trillion budget request includes $73.3 billion in discretionary budget authority for the Department of Housing and Urban Development (HUD), a $1.1 billion increase from the 2023 enacted level.

“This budget takes an end-to-end approach in a very complex housing ecosystem, from homelessness to homeownership, from economic development to disaster recovery,” said Adrianne Todman, HUD deputy secretary. “It relies on all of our partnerships across the country to help the people.”

Denise Muha, executive director of the National Leased Housing Association (NLHA), expressed strong support for the budget plan, noting “the administration has recognized the significant housing challenges facing low- and middle-income families and developed a comprehensive proposal that hits all of the high notes. NLHA is particularly excited about efforts to expand access to rental assistance through increasing the supply of housing vouchers and, for the first time in decades, adding to the stock of project-based rental assistance.”

While some observers say the budget faces a challenge in the Republican-controlled House, other pundits disagree.

HUD Awards $3.16 Billion to Public Housing Authorities

The funding will go toward modernizing public housing across the country.

(WASHINGTON, DC February 22nd, 2023) The Department of Housing and Urban Development (HUD) announced $3.16 billion in funding to nearly 2,770 public housing authorities (PHAs) in all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. The grants will be used to make important capital investments in the public housing stock.

“As I have traveled the country, I’ve heard time and again from families and seniors in public housing that a decent home in a safe community shouldn’t be too much to ask for,” said HUD secretary Marcia L. Fudge in a statement. “With this investment today, we are committing to work with our public housing authority partners to guarantee homes in public housing are worthy of the families and individuals who live there.”

The grants are provided through HUD’s Capital Fund program, which offers annual funding to PHAs to build, renovate, and/or modernize the public housing in their communities. Housing authorities can use the funding to complete large-scale improvements, such as replacing roofs or making energy-efficient upgrades to heating systems and installing water conservation measures.

WASHINGTON December 15th, 2022 – 124 bipartisan US lawmakers have pledged support for the Neighborhood Homes Investment Act (NHIA), which would offer a tax incentive to developers to minimize their risk when building or rehabilitating existing housing. If passed, the legislation could lead to the development of 500,000 starter homes in struggling communities over the next decade in addition to $29.3 billion in federal, state and local tax revenues and fees, $42.9 billion in wages and salaries, and over 780,000 jobs in construction and construction-related industries.

WASHINGTON, May 16 2022 – The United States Government announced a Housing Supply Action Plan to ease the burden of housing costs over time by boosting the supply of quality housing in every community. The plan includes both legislative and administrative actions to help close the nation’s housing supply shortfall in five years. Among other provisions, the plan includes: test

  • Financing over 800,000 affordable rental units by expanding and strengthening LIHTC through enactment of provisions included in the House-passed reconciliation bill. The bill would increase tax credit allocations, provide additional capacity for private activity bonds to finance affordable housing, target tax credits for housing that serves extremely low-income Americans, and make it easier to produce and preserve affordable housing with tax credits in Indian Country.
  • Providing an additional subsidy through the LIHTC to developments that add net new supply and that would otherwise not be financially feasible. This proposal was included in the FY 2023 budget.
  • Strengthening Government-Sponsored Enterprise (GSE) financing for multifamily development and rehabilitation.
  • Leveraging American Recue Plan funds for investments in affordable housing.
  • Finalizing the LIHTC Income Averaging proposed guidance by the end of September 2022.
  • Advancing HOME as a key tool for the production and preservation of affordable rental and homeownership housing.
  • Providing tax credits to build and rehabilitate homes for low- and moderate-income homebuyers. This proposed legislation, the Neighborhood Homes Investment Act (NHIA), is included in the House-passed reconciliation bill.
  • Improving the alignment of federal funds to reduce transaction costs and duplications and accelerate development.
  • Supporting the construction of more than 8,000 rural multifamily housing units.
  • Supporting new and existing affordable housing in Indian Country.
  • Providing incentives for land use and zoning reforms and reducing regulatory barriers.
  • Addressing supply chain disruptions for building materials.

Columbia, SC – 29 Jan 2022

South Carolina saw massive demand for its 4% LIHTC Credit and announced at it has limited the ability of certain developments to access the state’s 4% low-income housing tax credit (LIHTC) incentive. The stop is temporary and halts the allocation of credits until the state enacts new legislation or July 1st of this year, whichever comes first. Minutes of the meeting state the pause is because “the volume of interest in the low-income housing tax credit program and the substantial impact on the state’s general fund were both unexpected.” According to the South Carolina Revenue and Fiscal Affairs Office’s Tax Expenditure Report issued earlier this month, the state LIHTC allocated more than $25 million in fiscal year 2021-22 and was estimated for more than $84.3 million this year.

New Tax Credit Programs Introduced: MIHTC & NHTC

Aug. 19, 2021 (WASHINGTON) – Sweeping housing legislation announced today in the U.S. Senate would enhance the low-income housing tax credit (LIHTC) and introduced the middle-income housing tax credit (MIHTC) and neighborhood homes tax credit (NHTC).

The “DASH Act” aka Decent, Affordable, Safe Housing for All would provide an expansion of 9% LIHTC annual allocation, provide a 50% basis boost for properties for extremely low-income renters; reduce for four years the 50% financed-by test for tax-exempt-bond-financed properties, provide a potential 30% difficult development area basis boost for rural and Indian properties.  

The bill, introduced by Senate Finance Committee Ronald Wyden (D-Oregon) would also create a 5% and 2% MIHTC for rental properties serving tenants with incomes between 60% and 100% of the area median income (AMI), create an NHTC worth up to 35% of the qualified development cost or 80% of the national median sale price for new homes, whichever is less; create a renter’s tax credit for affordable housing operators who provide housing to tenants with monthly incomes below 30% of the AMI; and create a first-time homebuyer refundable credit for 20% of the purchase price of a home up to $15,000.   Senator Wyden said “Housing is a human right. Yet, millions of Americans pay more than half of their monthly take-home pay to keep a roof over their head. And more than half a million Americans don’t have housing at all,” Wyden said. “America is amidst a serious crisis of housing affordability, and it’s a big challenge that demands big, bold solutions. As housing prices skyrocket, a generation of young people are increasingly locked out of homeownership. It’s time America’s lawmakers get with the program and enact 21st century housing policies that adequately address 21st century challenges.”

Congress passed measures strengthening the creation of affordable housing. Highlights of the bill are as follows:

Permanent 4% Housing Credit rate: This is a big victory for housing credit advocates, who have made setting a minimum 4% rate a top priority. The 4% rate will apply to allocations of 4% credits made after December 31st 2020.

Disaster Housing Credit Allocation: This is the first time Congress has allocated disaster housing credits since the GO Zone allocation after Hurricane Katrina. Dozens of Gulf Coast counties have been subjected to disaster declarations in 2020, so they will receive additional credits. 

$25 Billion in Rental Assistance: States long the Gulf Coast are expected to receive another $1B for rental assistance. Renters and tenants will be eligible to apply for funding.

Extended Eviction Moratorium: The current eviction moratorium has been extended through January 31, 2021.

We applaud Congress for passing Housing Credit provisions that will lead to the development of hundreds of thousands of additional affordable homes and the members and advocates who have worked to communicate the need for these provisions to Congress.

The U.S. Department of Housing and Urban Development (HUD) published in last week’s Federal Register a notice of fiscal year 2021 (FY 21) fair market rents (FMRs) for the Housing Choice Voucher program, Moderate Rehabilitation SRO program and other HUD programs. The notice states that the trend factors used to determine FY 21 FMRs include updated economic assumptions to reflect the economic impact of the COVID-19 pandemic. The notice also enumerates how public housing authorities and other parties can request reevaluations of their FMRs. Comments on the notice are due Sept. 30 and the FMRs will be effective Oct. 1.

South Carolina has joined seventeen other states by enacting a state based affordable housing program that mirrors the federal LIHTC. The goal is to add critically needed affordable housing to workforce and income restricted seniors.

Calling it the “Workforce and Senior Affordable Housing Act” and signed into law on May 14, 2020, the program will be administered with the intention of being as robust as other successful state based LIHTC plans.    

Until the Act was passed, Georgia stood alone as having the only state-based low income tax credit plan in the Southeast.

More news to come as the office in Columbia is staffed up.

The most recent update provides additional guidance regarding the closings of FHA-insured transactions, loan application processing and projects already under construction:

Status of Closings

Potential Closing Delays. HUD may temporarily pause initial endorsement of new construction and substantial rehab loans that involve tenant-in-place rehab work or tenant relocation, or in areas that have shelter-in-place orders. For projects that have time-sensitive restrictions or contractual obligations that will expire if closing is delayed, HUD may proceed with closing but will require evidence that mitigants are in place to offset construction delays.

Electronic/Mail Closings. HUD closing attorneys will rely on electronic transmission of closing documents in lieu of hard copies in performing their closing review. Closings will be conducted either by mail or through the use of electronic transmission of documents, however, there are various logistical challenges which the parties should build in extra time to address, such as notarization. While some jurisdictions have authorized remote notarization, many have not, and even in those jurisdictions where remote notarization is permissible there are frequently issues involving title companies and recording offices.

Loan Application Processing

No Processing Delays. HUD staff are equipped to perform underwriting functions and all other duties remotely and HUD does not anticipate issues or delays in processing loans.

Electronic Submissions. HUD will permit applications and related documents to be submitted electronically. Plans and specifications should be sent directly to the processing construction analyst identified at the concept meeting to be reviewed remotely.

Relaxed Requirements for Third-Party Inspections.

  • If a third-party capital needs inspector cannot physically inspect the required units due to COVID-19 concerns, HUD may waive the sampling requirements in favor of inspecting only vacant and model units for recently built insured properties (within 10 years) or non-insured properties built within five years. In other cases, to the extent that the contracted appraiser cannot physically inspect the site, the appraiser should contract with a local appraiser.
  • In situations where interior access to a project is limited and the asbestos, lead-based paint and/or radon testing cannot be completed prior to application submittal, HUD will allow the submission of applications without these reports, although they will be required before issuing a Firm Commitment.
  • For Phase I ESAs where the preparer is unable to access the interior of the building due to COVID-19 concerns, HUD will accept the ESA without a visit to the site for projects already in HUD’s portfolio or new to HUD’s portfolio with up to Level 3 repairs. For all new construction and substantial rehabilitation projects and certain 223(f) projects that do not meet the low risk criteria the ESA preparer must conduct an in-person site visit; however, HUD will accept a draft ESA report that includes all information except the physical site visit for purposes of submitting the pre-application or application.

Construction Issues

No Relief from Contractual Obligations. HUD confirmed that there is no impact on the enforceability of contracts among parties to an insured loan except insofar as any provisions in the contracts provide for (e.g., force majeure).

Construction Impediments. All construction parties should stay engaged and provide regular updates to the lender and HUD to the extent possible. If a job site is shut down, the general contractor (or in the absence of the general contractor, the owner) must ensure that the site is properly secured and that all completed work and stored materials are protected. If limited work continues, workplace safety procedures and CDC advisories for “social distancing” should be observed.

P&P Bonds and Builder’s Risk Coverage. The parties should proactively ensure that surety bonds and Builder’s Risk insurance policies will remain in place and will not be impaired by any job slow-down or work stoppage.

Required Monthly Progress Updates. General contractors, owners and supervising architects should report construction work status on a monthly basis in connection with their monthly requests for reimbursement of costs and associated inspection trip report. Monthly reports and requests for reimbursements should continue for soft costs even if little or no work has been completed.

Relief for Repair Escrows for Section 223(f) and Section 223(a)(7) Projects. HUD will consider amending the Escrow Agreement for Non-Critical Repairs, which typically has a 12-month completion deadline for non-critical repairs, in those cases where owners and lenders have documented COVID-19 related delays.

Virtual Inspections.  Reimbursement requests for completed work will be approved even if the supervising architect and/or the HUD Inspector are unable to conduct an onsite inspection based on the supervising architect’s verification of the work completed based on a recorded virtual inspection and virtual site meeting. 

This article was reproduced by permission by Nixon Peabody. Original blogpost by Nixon Peabody published on April 6th, 2020. Original can be found via this URL. 

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