New Markets Tax Credits (NMTC) help localities build stronger neighborhoods by investing in housing, schools, and other vital projects that are targeted at helping low-income communities. Between 2003 and 2015, $42 billion in direct NMTC authority has generated almost $80 billion in capital for local businesses and revitalization projects. NMTC investment has resulted in the creation or retention of over 750,000 jobs, and the financing of over 178 million square feet (sq. ft.) of commercial real estate and almost 14,000 affordable housing units. NMTCs are a proven and effective tool for generating private-sector investments in communities in need. This is one in a series of articles that show how public housing authorities (PHAs) and community development agencies have successfully used federal tax credits and tax-exempt bonds to build and/or preserve public housing and affordable housing and to increase the sustainability of communities. Continue reading
Before (bottom) and after (top) pictures of Emerald Family Properties buildings. Photo credits: Walla Walla Housing Authority
The Low-Income Housing Tax Credit (LIHTC) is one of the most effective tools for creating new and critically needed affordable housing, and accounts for the vast majority of all affordable rental housing created in the United States. This is one in a series of articles that show how public housing authorities (PHAs) and community development agencies have successfully used federal tax credits and tax-exempt bonds to build and/or preserve public housing and affordable housing, and to increase the sustainability of their communities.
Walla Walla Housing Authority: Emerald Family Properties
Walla Walla (Wash.) County has the largest affordable housing gap in the state of Washington, and so the pressure is high to keep existing public and affordable housing. Recently, the Walla Walla Housing Authority (WWHA) used a combination of 4 percent LIHTCs and tax-exempt bonds to revitalize and preserve the Emerald Family Properties, an 84-unit family development with two- to five-bedroom units in nine neighborhoods. The financing package allowed the housing authority to upgrade both the interiors and the exteriors of the units, and to increase energy efficiency in a way that would lower the utility costs for the residents. Emerald Family Properties has project-based vouchers attached to its units, and thus is able to serve very low-income families as well as those of moderate income.
“This project never would have pointed in the 9 percent LIHTC credit round, so the 4 percent LIHTC and tax-exempt bonds are essential financing tools that we use to address our community’s housing needs,” said WWHA Executive Director Renée Rooker. “Over the past five years, we have developed 245 units serving elderly individuals, veterans, persons with disabilities, and families by utilizing 4 percent LIHTCs and tax-exempt bonds. Besides Emerald Family Properties, we will have completed 80 more units in the next couple of weeks. None of this could have transpired without these financing tools.”
For more information about this project or to share your organization’s 4 percent LIHTC success story, please contact firstname.lastname@example.org.
After 13 years at NAHRO, including 13 months spent as Acting CEO during the search for a permanent leader, John Bohm is leaving the association to move out of Washington, D.C. We at NAHRO thank him for his service, mentorship, and friendship, and wish him the best.
During his tenure, Bohm led the Congressional Relations Department, successfully educating and informing members of Congress and their staff about the importance of HUD appropriations, the American Recovery and Reinvestment Act and other vital affordable housing and community development-related issues. He also helped build a responsible platform for NAHRO advocacy, co-authored the NAHRO Advocacy Training Guide, and conducted advocacy training sessions across the country.
“I’m very proud of everything that’s been accomplished here,” Bohm says, “but I’d like to emphasize that none of it would have happened without the ideas and hard work of many past and present NAHRO staff. I’ve been privileged to work with smart, creative, diligent people who are dedicated to our members and the good work they do, and while I will miss them all, I am happy that the association remains in their more than capable hands.”
Bohm also helped create the Housing America advocacy campaign, which celebrated its 10th anniversary this year. He instituted the campaign’s signature “What Home Means to Me” calendar contest and helped grow the campaign, which now includes both Housing America Month and the popular Voices of Housing conference panel. He also redesigned NAHRO’s annual Legislative Conference (now known as the Washington Conference), launched the popular yearly “Perspectives on the Federal Budget” panel, and created both the Mary K. Nenno Advocacy Award and the NAHRO Legislator of the Year Award.
As staff liaison for the Legislative Network, Bohm increased the focus and breadth of the group’s responsibilities. He also staffed NAHRO’s Small Agency Task Force and helped increase Congressional awareness of issues affecting small housing authorities.
Bohm trained and mentored many members of NAHRO staff. He also wrote a semi-regular “Notes from the Front” column for the NAHRO Monitor for many years.
On November 8, HUD released Notice PIH-2017-22 titled “Guidance on Eligibility for Asset-Repositioning Fee (ARF) when Public Housing Units Are Approved for Demolition, Disposition, or Transitioned to Homeownership.” The Notice applies to all PHAs administering Public Housing, including MTW PHAs.
PHAs that transition projects or entire buildings within a project out of the public inventory may be eligible for ARF, which is an add-on to Operating Subsidy eligibility. ARF supplements costs associated with administration of demolition and disposition, tenant relocation, and minimum protection and services associated with such efforts. It is not intended for individual units within a multi-unit building.
The guidance discusses which units would be considered eligible for ARF, the timeline for homeownership and non-homeownership ARF, how to identify unit months for units eligible to receive ARF, how to calculate ARF amounts, how to determine the ARF funding period versus the Operating Subsidy funding year, how to use ARF when a PHA demolishes and/or disposes of different buildings in one project in multiple phases, and how to adjust the rolling base if some units in a project are ARF eligible and others are not.
The House Ways and Means Committee this week released its long-await tax reform legislation, the Tax Cuts and Jobs Act (HR 1). While the bill retains the Low-Income Housing Tax Credit (LIHTC), one of only two business credits preserved, it eliminates several other taxes and bonds that are critical to community development and affordable housing. If passed as-is, the Tax Cuts and Jobs Act would be devastating for communities.
The committee is scheduled to begin mark-up of the bill on Monday, November 6 at 12:00 pm ET, a process that is likely to last several days. This means there is very little time to ask lawmakers to propose changes- contact your Representatives now to tell them to preserve the parts of tax code that are so critical to communities.
What’s in the Bill
- Low Income Housing Tax Credit: Maintains the credit
- Corporate Tax Rate: Cut from 35 percent to 20 percent
- New Market Tax Credit: Eliminates
- Private Activity Bonds: Eliminates
- Historic Preservation Tax Credit: Eliminates
- Mortgage Interest Deduction: Caps at $500,000 for new mortgages, savings not re-invested in affordable housing
The Low-Income Housing Tax Credit is preserved, but the 4 percent remains unauthorized. Also missing from the Tax Cuts and Jobs Act is language proposed by Rep. Pat Tiberi (R-Ohio) and Rep. Richard Neal (D-Ma.) in their Affordable Housing Credit Improvement Act (HR 1660). Though NAHRO thanks the Ways and Means Committee for retaining the 9 percent credit, NAHRO opposes other changes to bonds and the corporate tax rate will undermine the effectiveness of the program and essentially eliminate the 4 percent credit.
Private Activity Bonds (PABs) are tax-exempt bonds issued by state and local governments to drive private investments in community development, housing (Housing Bonds), infrastructure and educational projects. The bill would remove the tax exemption for PABs, including multifamily Housing Bonds, which helps finance almost half of all affordable homes produced and preserved by LIHTC.
PABs are responsible for almost half of all affordable homes produced by LIHTC annually, and it is a critical tool that must be preserved. Although the public housing inventory is an integral component of our nation’s infrastructure, chronic underfunding of the Capital and Operating Funds has placed the inventory at risk, with a mounting capital needs backlog of well over $26 billion. PHAs often turn to LIHTC to preserve and revitalize their distressed public housing inventory. A one-pager by the ACTION Campaign on the use of LIHTC for preservation and the impact of Rep. Tiberi’s and Rep. Neal’s bill is available here.
NAHRO members typically seek out 4 percent Housing Credits over the 9 percent because they are non-competitive and more accessible. However, to use the 4 percent Housing Credit, projects must be funded in part with tax-exempt bonds. The House bill’s elimination of tax-exempt bonds could completely devastate the production of affordable housing by NAHRO members.
The Tax Cuts and Jobs Act could also severely handicap the Rental Assistance Demonstration (RAD) program, which depends on LIHTC for its success. RAD allows PHAs to leverage public and private debt and equity to address the capital needs backlog of their public housing portfolios. In RAD, units move from a public housing to a Section 8 platform with a long-term contract that must be renewed, ensuring that the units remain affordable to low-income households. HUD data thus far shows LIHTC has been included in the financing for almost half of all RAD transactions, amounting to over 73,000 units being converted. Additionally, of all of the LIHTC-financed properties participating in RAD, 70 percent of those projects specifically depend on the 4 percent Housing Credit. As a cost-neutral program, Congress has supported RAD by expanding its current cap on conversions to 225,000 units, but eliminating PBAs will undermine their support for RAD.
NAHRO opposes the bill’s repeal of this tax exemption since it would severely hinder the financing of LIHTC projects that provide safe, decent, and affordable housing for our nation’s growing share of low-income renter families.
New Markets Tax Credits (NMTC) help localities build stronger neighborhoods by investing in housing, schools, and other vital projects, and are targeted at helping low-income communities. Over the last 25 years, about $51 billion in NMTC authority have generated $42 billion in local investments, resulting in the creation or retention of over 700,000 jobs, and the financing of over 178 million square feet of commercial real estate and almost 14,000 affordable housing units. NMTCs has proven to be an effective tool for generating private sector investments in communities in need, while still remaining a net positive program for the economy. NAHRO supports the continuation of this program.
Historic Tax Credits also have a proven track record of stimulating economic growth while also preserving our valuable national architectural heritage. We believe that these three important instruments for infrastructure creation and preservation should remain part of our economic development toolbox, and hope that they will be restored in later versions of the bill.
The Ways and Means Committee will begin mark-up of the bill on Monday afternoon. Debate of the legislation and amendments are expected to last up to four days.
Leadership is currently working on changes to the bill to secure votes and ensure it meets the procedural requirements for budget reconciliation in the Senate. The President has also urged lawmakers to include a repeal of the individual health care mandate, a move that could politically complicate its passage. Still, House leadership is optimistic that the bill will pass with few Republican defections before Thanksgiving.
The path through the Senate is less clear; Senator Rand Paul (R-Ky.) voted against the passage of the budget resolution that included the framework for this tax reform legislation and several other Republican Senators have expressed concern about the bill. However, because the Tax Cuts and Jobs Act is being moved forward under the budget reconciliation process, only a simple majority is needed to approve the legislation. Leadership is aiming to have the bill to the President’s desk before adjourning for the holiday recess in December.
As the bill moves forward, NAHRO will provide coverage through the blog, Direct News emails, and @NAHRONational on Twitter.
Jenny Hsu also contributed to this article.