Multifamily housing bonds could be attached to economic stimulus

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As lawmakers in Washington search for bipartisan pieces to a third round of legislation to deal with the COVID-19 crisis, one popular measure that could hitch a ride on a larger economic stimulus package involves multifamily housing.

The Affordable Housing Credit Improvement Act last week achieved a milestone by garnering bipartisan cosponsorship by more than half of the 435 members of the House. The 221 sponsors include 145 Democrats and 76 Republicans.

A key provision would enhance the 4% Low-Income Tax Credit which is often packaged with multifamily private activity bonds for multifamily housing construction and rehabilitation.

About half of the multifamily housing units built nationally that use the federal 4% credit are financed with tax-exempt PABs. The other half use a 9% federal tax credit that does not allow PAB financing.

Rep. Suzan DelBene, D-Wash.

Rep. Suzan DelBene, D-Wash., the lead sponsor of the bill, estimates it would create 550,000 new affordable housing units over 10 years.

“Now that a majority in the House is on record in support of this legislation, it is time to pass it,” DelBene in a press statement. “The housing crisis gets worse every year, and this is an important step to helping people find an affordable place to call home. States like Washington cannot wait any longer.”

The Senate has an identical companion version of the bill sponsored by Sen. Maria Cantwell, D-Wash. With 38 other cosponsors, including 11 Republicans led by Sen. Todd Young of Indiana who was an original cosponsor.

The House version could easily pass, but the challenge for advocates is getting a floor vote in the Republican-controlled Senate.

Previously, supporters of the bill were looking for an opportunity to add it onto a tax-extenders bill or infrastructure legislation.

The outlook for infrastructure legislation prior to the November election had appeared dim, but the economic jolt caused by the COVID-19 pandemic may spur Congress to look for a massive stimulus bill to get the economy back on track.

“Now we’re looking at the possibility of multiple federal stimulus bills that could include tax packages so some or all of the Affordable Housing Credit Act could be included in those,” said Stockton Williams, executive director of the National Council of State Housing Agencies.

“Housing development rehabilitation is an economic stimulus and in the case of the housing credit it is an existing program with an effective delivery system through the states and there is a huge need for the kinds of housing that it makes possible,” he said. “It would make sense to include it in an economic stimulus.”

DelBene is looking for options to advance her bill, according to spokesman Nick Martin,

“This legislation is a big priority for our office,” Martin said in an email. “Obviously, Congress and Rep. DelBene are keenly focused on the COVID-19 response which is hitting our district especially hard currently.”

Multifamily housing advocacy groups estimate the legislation would increase affordable rental rental housing production by 384,000 units over 10 years with 66,000 of that coming from projects that use tax-exempt multifamily PABs.

The 4% tax credit used for multifamily PABs often ends up being 15% to 20% less than advertised because of current borrowing formulas which the legislation would replace with a standardized 4% rate that is expected to boost the use of multifamily PABs.

Most of the other gains in housing units would come from gradually raising state volume caps for using the 9% credit by 50% over five years.

States have been exhausting all of their 9% credits, which are capped nationally, and are increasingly using the 4% program in tandem with multifamily bonds.

The American Recovery and Reinvestment Act of 2009, enacted as a stimulus in the wake of the 2008 financial crisis, included a temporary provision that’s already in this bill. It would allow so-called “bond recycling” to be used in conjunction with financing that includes the 4% housing tax credit. Bond recycling allows repayments to be used for financing new projects without being subjected to state volume caps for PAB issuance.

Bond recycling paired with the 4% credit could generate an additional 100,000 housing units over 10 years, according to a rough estimate by Novogradac and Company of San Francisco.

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