Congress Considering Retroactive Changes Affecting Low-Income Housing Tax Credit Property Owners

July 24, 2019                          By: Dirk Wallace, Michael Novogradac

Two bills recently introduced in Congress would retroactively alter rights of existing owners of low-income housing tax credit (LIHTC) properties: One bill changes the terms of rights of first refusal (ROFR) and the other alters qualified contract exit price calculation. Part I of this blog post reviews rights of first refusal. Part II will address qualified contracts.

Rights of First Refusal

Under current law, Section 42(i)(7)(A) specifies that “No [federal] income tax benefit shall fail to be allowable to the taxpayer with respect to any qualified low-income building merely by reason of a right of 1st refusal held by … a qualified nonprofit organization …. after the close of the [15-year] compliance period for a price which is not less than the minimum purchase price ….” The minimum purchase price is generally the outstanding debt on the property, plus all tax liability arising on the sale.

The Section 42(i)(7) right of first refusal was enacted in 1989 after a task force convened by Sens. George J. Mitchell, D-Maine, and John C. Danforth, R-Mo., recommended that the safe harbor allow for non-profits to hold a below-market purchase option. Following the task force recommendation, Mitchell and Danforth sponsored a bill in Congress in 1989 (S.980) that would have provided that “the determination of whether any qualified low-income building is owned by the taxpayer shall be made without regard to any option by a qualified nonprofit organization (as defined in subsection (h)(5)(C)) to acquire such building at less than fair market value after the close of the compliance period.”...................Read More

Bill Seeks to Eliminate, Modify Qualified Contract Option

July 12, 2019                     By: Donna Kimura

The legislation aims to preserve LIHTC properties.

Legislation has been introduced to modify the qualified contract option for low-income housing tax credit (LIHTC) properties.

LIHTC developments generally must remain affordable for at least 30 years—a 15-year compliance period and a 15-year extended-use period. However, owners are permitted to pursue a qualified contract, a process that can allow properties to convert to market rate after just 15 years.

Introduced by Sens. Ron Wyden (D-Ore.), Todd Young (R-Ind.), Ben Cardin (D-Md.), and Sherrod Brown (D-Ohio), the Save Affordable Housing Act (S. 1956) seeks to eliminate the option for future projects. In addition, it would alter the statutory qualified contract price formula and require existing properties to be sold at a fair-market price.

The legislation seeks to prevent the premature loss of affordable housing and ensure that housing credit properties remain affordable for at least 30 years. Many states have set longer affordability requirements..........................Read More

Housing Leaders Blast HUD Plan to Ban Mixed-Status Families

July 2, 2019                            By:  Donna Kimura

They say the move will increase the nation's homelessness crisis.

Thousands of American children will be at risk of homelessness under a controversial proposal by the Department of Housing and Urban Development (HUD), according to public housing leaders.

The plan, which would evict families in which a member is undocumented from obtaining subsidized housing, threatens the housing stability of 25,000 mixed-immigration status families, including 55,000 children who are U.S. citizens or otherwise eligible for HUD assistance, say officials who are fighting the move.

The proposal is a major change from a long-standing rules that allow families of mixed-immigration status to reside in subsidized housing as long as one family member is a legal resident.

Opponents of the new proposal stress that housing subsidies do not support undocumented immigrants. These individuals are permitted to live with their families, but the rents are prorated to ensure that subsidies do not assist with the undocumented immigrant’s portion of the rent.......Read More

Seizing the Opportunity for Affordable Housing Nationwide

July 16, 2019                       By: Emily Cadik

AHTCC's Emily Cadik says it's a critical time to advocate.

Emily Cadik

Advocates of affordable housing have an important opportunity in today’s political climate. Despite legislative gridlock and deep partisan conflict, affordable housing has emerged as one of the few topics met with bipartisan support.

Rent is skyrocketing in nearly every corner of the United States. From rural farm regions to our densest cities in red and blue states alike, paying the rent has become increasingly burdensome. Rental rates soar as wages slowly creep, still below prerecession benchmarks in many states. As a result, over 10 million American households pay more than half their monthly income on rent. For particularly vulnerable demographics, including people with disabilities, veterans, and senior citizens, the situation can be even more dire.

And while white-hot housing markets in urban centers continue to make headlines, housing affordability challenges extend far beyond metro regions, where rents are driven upward by scarcity and rising demand. As the crisis spans more and more of the U.S., so has the recognition among members of Congress that something must be done to address it................Read More

5 Lessons from Cities on Affordable Housing

July 22, 2019                   By: Bill Duryea                             Illustrations By: Matt Chinworth

In America’s fast-growing cities, the need for new housing isn’t keeping up with the demand. A handful of cities have found some new policy ideas to address a problem that doesn’t have a silver-bullet solution. Five big lessons from cities across the country—and a surprise.

1.  Single-family housing can be un-zoned

The middle-class dream of a single-family home is the biggest impediment to affordable housing, according to some housing activists—it keeps prices up by preventing new and denser developments, and NIMBY homeowners can be a potent political obstacle to change. But not always: In Minneapolis, the city council abolished single-family zoning in December. On lots where only one home could be built, now developers can put duplexes and triplexes.

2.  Veterans have a secret weapon

In Arlington, Virginia (outside Washington, D.C.) one American Legion post has partnered with a local affordable housing non-profit to build 160 affordably priced apartments on its property, about half of which will go to veterans. The Legion has thousands of posts across the country, a huge inventory of convertible locations...........................Read More

Cities Need Affordable Housing, but Builders Want Big Profits. Can It Work?

July 9, 2019                               By: Eugene L. Meyer

Using government subsidies, tax credits and zoning changes, municipal leaders are encouraging developers to incorporate affordable housing into mixed-use projects.

The Wharf, a $2.5 billion development in Washington. The city negotiated with developers to include a certain percentage of

 affordable housing.   Al Drago for the New York Times

WASHINGTON — The Wharf is a gleaming, $2.5 billion development that has transformed a long-stagnant waterfront into a major destination in the nation’s capital.

Along a mile of the Potomac River is an array of high-end hotels, entertainment venues, shops, restaurants and apartments. They include the 6,000-capacity Anthem concert venue, an InterContinental hotel and Vio, a luxury condominium where prices have soared up to $2.9 million.

But the city has also required the developer to include affordable housing on the project’s 24 acres. Of the 761 units in the first phase of the development, 26 percent are listed as affordable, and more are promised in the second phase.

From Washington to San Francisco, municipal leaders are facing increased pressure to provide affordable housing. Using a combination of government subsidies, tax credits and zoning changes, they are encouraging developers to incorporate affordable units into mixed-use projects....................Read More

A New Approach on Housing Affordability

July 7, 2019 
               

Some Democratic presidential candidates are emphasizing the need to build more housing. That could make a big difference.

Lisk Feng

A growing number of Americans are struggling to cope with the high and rising cost of rental housing in the United States. On any given night last year, more than half a million Americans were homeless. Nearly 11 million households managed to keep a roof over their heads only by spending more than 50 percent of their income on rent, sharply curtailing their spending on food, health care and other needs. Millions more cannot afford to live in the neighborhoods where children are most likely to thrive, or in the cities where jobs are concentrated.

Democratic presidential candidates are promoting industrial-strength plans to ease the pain. The ideas come in two flavors: subsidies for renters, and efforts to increase construction.

The focus on construction is a welcome development. The United States is in the depths of a decade-long construction drought that is driving up the cost of existing homes. Builders added about 1.2 million units last year; Harvard’s Joint Center for Housing Studies estimates the nation needs another quarter-million units a year to keep pace with population growth. A key reason for the shortfall is that local governments are impeding construction...........Read More

Meeting America's Affordable Housing Needs Requires GSE Reform, and More

July 8, 2019                          By: Michael Stegman

Much of the writing that I will undertake in my fellowship year at the Joint Center for Housing Studies will address the Trump administration’s and Congress’s administrative and legislative efforts to reform the secondary mortgage market, including determining the fate of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which were taken over by the federal government in the midst of the housing market crash in 2008, and where they remain today.

To put the financial crisis in perspective: between the fourth quarter of 2006 and the first quarter of 2009, home prices, which had not declined nationally since the Great Depression, collapsed by nearly a third. By the end of 2009, nearly one in four homeowners owed more on their mortgage than their home was worth. By early 2010, mortgage delinquencies had more than doubled from pre-crisis levels, and nearly one in ten single-family loans was seriously delinquent or in foreclosure. Between the end of 2006 and 2010, over $6 trillion—more than a quarter—of Americans’ housing wealth was lost.

Consistent with a forty-year career of teaching graduate courses in housing finance and public policy, conducting research, and writing, data and evidence will continue to guide my work as a fellow, but based upon nearly five years working in the Obama administration, I will continue to view the opportunities and challenges of housing finance reform through a Democratic lens. As Counselor for Housing Finance Policy to the Secretary of the Treasury, I helped move a bipartisan reform bill (commonly referred to as Johnson-Crapo) out of the Senate Banking Committee in 2014 but failed to garner a large enough bipartisan majority to move it to the floor for a full Senate vote.....Read More