On December 27, 2020, President Trump finally signed the FY 2021 Omnibus Spending and COVID-19 Relief Bills. Passage of these two pieces of legislation will impact the affordable housing industry in some significant ways, primarily by setting the 4% LIHTC at a floor of 4 percent and providing $25 billion in emergency rental assistance.
Highlights of the COVID-19 relief relating to housing include:
- $25 billion in emergency rental assistance;
- Extension of the CDC eviction moratorium to January 31, 2021 (it was set to expire on December 31, 2020);
- $600 stimulus checks for income-qualified single taxpayers and $1,200 for joint filers and an additional $600 per qualifying child (this should not be counted as income for affordable housing purposes); and
- $300 per week in enhanced unemployment insurance benefits starting after December 26 and ending March 14, 2021 (since this is temporary income, it should not be counted as income for affordable housing purposes).
Rental Assistance
The $25 billion in emergency rental assistance will be split among the states and territories, with no state receiving less than $200 million.
Current estimates for unpaid rent are as high as $70 billion. The CDC eviction moratorium only delays the payment of rent – it provides no relief to renters or landlords. The only solution is actual money to assist with the payment of rent.
The funds will be distributed to states, tribes, territories, the District of Columbia and local governments with population in excess of 200,000. Agencies that receive the funds must expend at least 90% to pay
- Rent;
- Rental arrears;
- Utilities and home energy costs;
- Utilities and home energy costs arrears; and
- Other housing expenses caused by the pandemic.
The assistance may last up to 12 months, plus an additional three months if needed to ensure housing stability.
The remaining ten percent of the funds may be used for other services relating to the pandemic (e.g., case management) and/or agencies’ administrative costs.
To be eligible, tenant households must meet each of the following criteria:
- One or more individuals has –
- Qualified for unemployment benefits, or
- Experienced a reduction in household income, incurred significant costs, or experienced other financial hardship due, directly or indirectly, to the pandemic (the applicant must attest to this in writing).
- One or more individuals must demonstrate a risk of experiencing homelessness or housing instability, which may include –
- A past due utility or rent or eviction notice,
- Unsafe or unhealthy living conditions, or
- Any other evidence of such risk.
- The household income may not exceed 80% of the Area Median Income based on either –
- Total income for calendar year 2020, or
- Confirmation of monthly income at the time of application.
When documented by tenant confirmation, the administering agency must re-determine eligibility every three months. This assistance will not count as income for purposes of determining eligibility under any federally funded program.
Among eligible households, priority will be given as follows:
- Incomes less than 50% of AMI, or
- At least one member of the household is unemployed as of the date of the application and has not been employed for the preceding 90 days.
Agencies may add their own criteria.
Agencies will make payments directly to landlords or utility providers on behalf of eligible households. Payments may be made directly to the household only if a landlord or utility provider refuses to participate.
Landlords may either assist renters in applying for assistance or apply on behalf of the renters. If applying on behalf of the renters, the landlord must –
- Obtain the signature (wet or electronic),
- Provide a copy of the application to the tenant, and
- Use any payments received to satisfy the tenant’s rental obligation.
Agencies will be required to collect – and submit to Treasury – the following information:
- Eligible households receiving assistance,
- Acceptance rate of applicants,
- Type of assistance provided to each household,
- Average amount of funding provided per household,
- Household income level categorized as (1) less than 30% of AMI, (2) 30% to 50% of AMI, and (3) 50% to 80% of AMI, and
- The average number of monthly rental or utility payments covered.
Before beginning the collection process, agencies will need to establish data privacy procedures that provide –
- All information is used only for the purpose of submitting reports, and
- Confidentiality protections for survivors of domestic violence, sexual assault, or stalking.
Agencies will also have to provide documentation of payments to households.
4% Credit
After pushing for a floor to the four percent credit for many years, the passage of the spending bill makes a 4% credit a reality. This set 4% will apply to both acquisition credits and credits allocated with tax-exempt bond financing. This will make as many as 130,000 additional tax credit units feasible between 2021 and 2030 that would not otherwise have been built.
The provision is effective for acquisition tax credits allocated after December 31, 2020, and for bond-financed properties placed in service and receiving allocations from private activity tax-exempt bonds issued after December 31, 2020. Guidance from the IRS will be needed to determine if properties that receive allocations or bond drawdowns prior to December 31 but receive subsequent allocations or drawdowns after December 31 will be eligible for the 4% credit.
Disaster Relief
The COVID-19 relief also includes $1.2 billion in ten-year credits in disaster LIHTCs for 11 states and Puerto Rico. These credits will be available for non-COVID-19 related disasters. Congress also granted LIHTC properties in disaster zones an additional 12 months to satisfy the 10% spending test and placed-in-service deadline, as well as providing more flexibility to allocating agencies by allowing disaster credits to be carried over to 2022. States and territories to receive the additional credit are:
- Alabama;
- California;
- Florida;
- Iowa;
- Louisiana;
- Michigan;
- Mississippi;
- Oregon;
- Puerto Rico;
- South Carolina;
- Tennessee; and
- Utah
As noted above, the rental assistance component of the legislation will be the most complex. States and localities will have to designate the agencies to receive the funds. In most cases, this is likely to be state Housing Finance Agencies and large Public Housing Agencies. These agencies will already have the mechanisms in place for distributing the money and providing the required tracking and reporting.
Landlords experiencing rent delinquencies should be proactive and reach out to state and local agencies to begin the process of obtaining the relief. There is not going to be nearly enough money to go around, so landlords who move quickly are likely to be those who benefit from the emergency funds.
Landlords should also notify residents who may qualify for the relief and determine whether the residents will apply themselves or if landlords will make application on behalf of the residents. Again, moving quickly may be a key to obtaining relief under the bill.