If you hear a subtle roar in the background and a not so familiar smell beginning to waft in the air, you are sensing the initial commencement of sausage making within the beltway of Washington, DC. After years of sharing a mythical existence in the company of Big Foot and the Loch Ness monster, “infrastructure” negotiations have actually begun. Along with the negotiations on the FY2022 budget, the next four to six months will either be the most economically & structurally consequential in a generation or the biggest dud since Geraldo opened Al Capone’s vault.
We have already reviewed the introduction of the Affordable Housing Credit Improvement Act (AHCIA) of 2021. We continue to build bipartisan support for H.R. 2573 and S. 1136 and ask that you reach out to the California delegation and ask them to cosponsor the AHCIA. All the resources you need are on the ACTION Campaign’s Advocacy Tools website.
We have now seen the Administrations LIHTC proposal, an additional allocation called the Opportunity Housing Credit Dollar Amount (OHCDA). In calendar years 2022 through 2026, the aggregate number of new OHCDAs would be 118 percent of the aggregate annual number of new OHCDAs under current law (approximately $11 billion annually). A different per capita amount would be applied to each state (as determined by a formula established by the Treasury Secretary in consultation with HUD) that provides higher amounts to states with higher costs of constructing and operating affordable housing.
Housing credit agencies would be required to allocate the majority of their OHCDAs to projects in Census Tracts of Opportunities (CTOs). Under the proposal, a CTO is defined as a tract that is entirely in one or more difficult development areas (DDAs). The proposal also provides for a permanent basis boost of up to 50 percent for buildings in DDAs that receive allocations of either HCDAs or OHCDAs.
So right now you are saying “what?”. While different than the proposal in the AHCIA which seeks to provide a basis boost for developments in high opportunity areas, both proposals focus on the production of affordable housing in areas that would provide better opportunities and outcomes for residents. The OHCDA proposal, while complicated, does express the Administration support for expanding affordable housing production which is important. Yet based on conversations with tax staff on the Hill I would look more toward the AHCIA as the vehicle for LIHTC expansion in the infrastructure conversation.
As of the drafting of this update we have yet to see the introduction of Senator Wyden’s Decent Affordable Safe Housing (DASH) Act. We will likely know much more about this significant piece of housing legislation following the HAG/AHTCC virtual Congressional Housing Forum on June 9th at which Chairman Wyden will speak. As of now we expect this legislation to include the Middle-Income Housing Tax Credit, potentially an increase in the PAB volume cap, a tax credit and/or basis boost focused on services at LIHTC properties and much more.
I am also confident in my prediction there will be no bipartisan infrastructure proposal and that all legislation will proceed through the reconciliation process. This leaves little margin for error in both the House and Senate and will test the negotiation skills of Speaker Pelosi, Majority Leader Schumer and of course, President Biden. The size of the infrastructure package, what is included and what revenue is raised to help pay for it will all be high-wire acts for the leadership and committee chairs. Reconciliation also poses challenges for our LIHTC agenda as not all of what is included in the AHCIA can pass through the rules of the process. I remain bullish on the increase in the 9% LIHTC, a reduction of the 50% test and the basis boost proposals but after that we are on shaky ground.
The coming weeks and months will be very busy and at times likely put us through the grinder, but the LIHTC and your advocates are well positioned. We are in close contact with the administration, the tax writing committees and our champions are equally focused on our goals for the LIHTC. So, my advice is stay focused on our goals, ignore the noise, the news and talking head predictions of success or failure. Keep up your advocacy, have fun this summer (we all deserve and need some fun) and get ready for DC’s version of Top Chef with way too many cooks in the kitchen.
