Calendar year 2015 was a landmark year for the Low-Income Housing Tax Credit program because we finally were able to achieve enactment of a permanent minimum 9% tax credit rate for allocated housing credits. This success was due to the diligent efforts of a broad coalition of affordable housing advocates across the country, including NASLEF members. However, while we were pleased with the enactment of the minimum 9% credit, we are not able to obtain enactment of the minimum 4% credit for acquisitions. It is difficult to pinpoint the reasons for that failure, especially since there was no cost associated with the provision, but that is the risk we always face in federal tax policy since there are typically so few decision makers in the room when a final deal is negotiated. Undoubtedly there was some misunderstanding about what the provision would do.
Our failure to obtain the minimum 4% credit illustrates the high importance of continuing our outreach efforts to elected officials and their staffs to educate them about the tremendous affordable housing needs in the nation and the very successful record of the Housing Credit program.
For the last few years, the Housing Credit community has mostly been on the defensive as we have worked to make sure that the program is saved if Congress enacts fundamental tax reform legislation. However, now with the prospects for tax reform still quite remote, and with the enactment of the permanent 9% credit, the affordable housing community is now setting its sights on a much more ambitious, long-term goal: the enactment of legislation to greatly expand Housing Credit resources through a 50% increase in the Housing Credit allocation cap.
The industry is undertaking this effort because there is such a huge shortage of resources to deal with ever worsening affordable housing crisis. Today, more than a quarter of all renters pay at least half their income in rent, while only one in four eligible, low-income households receive any form of housing support. The Housing Credit is a key resource but there is just not enough of it. Because of its flexibility states are using the program to address a multitude of housing needs, using tax credits to deal with homelessness, to house special needs populations, to preserve federally assisted housing, and to deal with the overwhelming affordable housing needs of families and the elderly.
There are two ways being considered to achieve this objective: 1) a straight increase in the credit cap phased-in 10 percent a year over five years, and 2) giving states the option of trading in a portion of their private activity bond cap for new Housing Credit allocation cap.
The national, grassroots coalition of more than 1,300 organizations advocating for the Housing Credit program, the ACTION campaign, has undertaken a major national campaign in support of more resources for the program. Sometime during 2016, we expect Senator Maria Cantwell (D-WA) to introduce legislation for a 50% increase in the allocation cap, probably phased-in over a five year period. Meanwhile, Senator Sherrod Brown (D-OH) is working on related legislation to obtain the 50% increase by giving states the option to trade-in a portion of their private activity bond cap. This is a little more complicated proposal but should be politically more feasible since it simply permits states to trade -in one federal resource for another. Both Senators are intending to introduce their bills when they obtain a Republican Senate cosponsor. NASLEF members are active participants in the ACTION campaign and have joined this effort to advocate for more resources, although our membership is more focused at this time on the bond conversion proposal which we believe it is more politically attractive.
We don’t know what the future holds for the Housing Credit program but do know that everyone in our industry must be an advocate for both preserving the program in tax reform and increasing program capacity through a cap increase.