While it is been delayed due to a Senate recess, there will be another COVID-19 relief package. Hopefully, it will be passed by Congress by mid-August and based on indications from Congressional staff, may include a number of affordable housing components. At this point, the most likely affordable housing improvements to be included in any COVID-19 relief include:
- Enactment of a four percent Housing Credit Rate – this rate is currently at an all-time low of 3.07 percent, which is threatening the viability of a number of pending deals. Enacting a minimum 4 percent rate is immediately needed and would provide parity to the nine percent housing credit rate, which was enacted as part of Congress’s response to the 2008 economic crisis. Not only will a four percent rate provide an immediate equity infusion into developments now stalled, but it is estimated to produce 126,000 additional LIHTC apartments over the next ten years.
- Provide additional basis boosts to allow developments to access additional equity if needed for financial feasibility – boosts in eligible basis will supply needed equity for developments that are not currently financially feasible. The boost would apply to rural areas and Tax-Exempt Bond financed properties. Additional boosts may also be included for vulnerable populations, such as extremely low-income tenants and Native American communities.
- Allow developments to access four percent credits by lowering the “50% test” – Lowering the 50% threshold for bond financed deals will provide much needed flexibility for state agencies. In addition, a number of agencies have reached their bond cap, limiting the ability to access the four percent credits. Lowering the 50% test to 25% will allow the development of up to 1.4 million more LIHTC units in the next ten years.
- Increase the annual LIHTC allocation by at least 50 percent, phased in over two years, and adjusted for inflation, beginning in 2021 – This increase in credits will finance hundreds of thousands of affordable homes.
While there is no guarantee that any of these changes will be included in the upcoming legislation, there is broad bi-partisan support for all of these, so – we’re keeping our fingers crossed.