Two bills recently introduced in the Senate that are designed to increase investor interest in affordable housing have the backing of housing advocates, and at least one of them is expected to garner bipartisan support in Congress.
The Section 8 Voucher Reform Act of 2008 was introduced by Sen. Christopher Dodd, D-Conn., on Monday and the Affordable Housing Investment Act of 2008 was introduced by Sen. Maria Cantwell, D-Wash., on Feb. 25.
Dodd's Section 8 bill, which was co-sponsored by Sens. Jack Reed, D-R.I., Charles Schumer, D-N.Y., Robert Menendez, D-N.J., and Sherrod Brown, D-Ohio, is intended to stabilize funding for the voucher program, increase employment for families, and encourage housing development while preserving affordable housing, according to a release. The bill would provide a "stable formula for allocating voucher funds to provide predictable funding for public housing agencies."
"There has been a long effort to make vouchers more accessible in private market housing," Holland & Knight LLP tax lawyer Anthony Freedman said yesterday. "Certainly an effort to increase the acceptability and attractiveness of the vouchers to property owners is a positive step."
Meanwhile, Cantwell's bill, which is likely to garner bipartisan support, is designed to "create more affordable housing by updating and modernizing the low-income housing tax credit" and to facilitate private investment capital to increase the efficiency of affordable housing investment," according to a release.
The bill, which is pending before the Senate Finance Committee, would expand affordable housing by repealing the mortgage revenue bond 10-year rule and exempting from the alternative minimum tax the housing credit and interest on qualified mortgage bonds.
Co-sponsored by Sens. John Kerry, D-Mass., Gordon Smith, D-Ore., Ken Salazar, D-Colo., and Norm Coleman, D-Minn., the bill is being pushed by housing advocates, according to Garth Reiman, director for policy and government affairs at the National Council of State Housing Agencies.
"I think there's going to be strong bipartisan support for this bill. And I think that many members of the Senate Finance Committee will try to work with the leadership on the committee to find time on the agenda to advance it," Reiman said. "We think that the bill has strong industry support ... and the programs have traditionally received strong bipartisan support in the past.
"With everything going on in the housing market today, and the need to try to address some of those issues, this bill will be part of that effort," he added.
The NCSHA has been eyeing a repeal of the mortgage revenue bond 10-year rule for years, a big issue for state housing finance and local finance housing agencies.
"The MRB 10-year rule requires bond issuers to use any mortgage payments they receive after the bonds have been outstanding for more than 10 years, to redeem those bonds. So they can't continue to use those repayments, to recycle them, for new homebuyers ... We're very anxious to see the MRB 10-year rule repealed," Reiman said.
Holland & Knight's Freedman said also that the AMT provision is key to garnering more interest in affordable housing.
"What Sen. Cantwell's bill does, from the credit prospective, is a combination of modernization improvements and devices to make it more useful, especially in today's market, including specifically allowing the credit to be used against the AMT. That's just critical," he said.
With the overall problems in the credit market, Freedman said allowing the housing credit to be used against the AMT "would significantly increase its attractiveness to investors."
"Right now, you can't use tax credits against the alternative minimum tax. So if you're a potential investor, but you're hit by the AMT, then the credit does you no good," Freedman said. "By allowing the credit to be used against the alternative-minimum tax, it makes it far more attractive to the investors."
Among other provisions in the bill, several changes to the housing bond program are "designed to enable housing credits and housing bonds to work together more effectively. They are intended to really facilitate efficiency," Reiman said.