Housing advocates press Ways and Means for PABs expansion
3 min read
Housing advocates are pressing the House Committee on Ways and Means to pass long-simmering legislation that includes expanding the use of Private Activity Bonds to support affordable housing efforts.
“We remain hopeful there will be legislation in the lame duck session of Congress to enact these sorely-needed proposals, which would increase the housing credit allocation and lower the bond financing threshold required for certain types of housing credit developments,” said Emily Cadik, CEO, Affordable Housing Tax Credit Coalition.
The AHTC spelled out what it’s looking for in a
AHTC
The tax teams were formed by Ways and Means Committee Chair Jason Smith R- Mo., in April and are charged with soliciting public comments regarding the future of the Tax Cuts and Jobs Act that is scheduled to sunset at the end of 2025.
AHTC took the opportunity to re-emphasize its support of the Affordable Housing Credit Improvement Act which has been bouncing around in Congress since 2016. A fresh version of the legislation was re-introduced to the House and Senate in May 2023.
The bill includes reconfiguring the bond financing threshold needed to secure Low Income Housing Tax Credits, which are a vital chip in the capital stack needed to develop affordable housing.
Per the letter, “Under current law, developers must finance at least 50% of a project with private activity bonds to qualify for 4% Housing Credits. Lowering this threshold to 25% would generate greater efficiency in the use of limited tax-exempt bonds and unlock significant additional private financing opportunities for affordable housing development.”
AHTC believes that lowering the threshold would allow states to make more efficient use of their bond volume caps and use the additional capacity to finance more affordable housing. More than half of U.S. states are already fully using or oversubscribed on their bond cap.
The AHCIA is currently stuck in the Senate. “Our congressional champions remain in search of a legislative vehicle to advance these broadly supported proposals this year,” said Cadik.
The National Council of State Housing Agencies is on the same page with the AHCIA and also sent a
In addition to lowering the bond threshold need to qualify for 4% LIHTC credits, they would also like to remove the cap on mortgage revenue bonds and multifamily housing bonds for five years.
They think the grace period is needed to allow municipalities to catch up with the demand for affordable housing communities.
Per their letter, “While Housing Bonds fall under the PAB volume cap, Congress has long provided unlimited bond authority for other types of private activities. For example, bonds used to finance airports, docks and wharves, and nonprofit entities such as hospitals are not subject to the volume cap.”
Both organizations are cheered by Vice President Kamala Harris’ emphasis on housing-related issues.
“We are very pleased that the Vice President’s housing priorities include expanding production with the housing credit,” said Jennifer Schwartz, director of tax and housing advocacy, NCSHA. “Regardless of the outcome of the presidential election, the AHCIA has a strong chance of advancing with its support in Congress from both parties.”
Assuming tax legislation doesn’t fly through Congress during the lame duck session, re-jiggering the TCJA could open other possibilities for PAB reform.
“While TCJA did not directly impact housing programs in 2017, the effort to extend its provisions provides an opportunity to move affordable housing tax legislation,” said Schwartz.
“Given the several trillion dollars of tax cuts expiring in 2025, we know that both parties will need to come together on tax legislation to avoid major across-the-board tax increases,” said Cadik. “We hope it will necessitate compromise on tax legislation that could finally serve as a vehicle for these long overdue proposals to expand and strengthen the housing credit.”
