By Jo Ikelheimer, MA, RHM, Director of LIHTC Compliance
Have you heard the latest? Two pieces of legislation were recently introduced that, among other things, would change the name of the Low-Income Housing Tax Credit (LIHTC) program to the Affordable Housing Tax Credit program. But other changes proposed by the legislation go beyond the cosmetic.
In the Senate, Maria Cantwell (D-OH) and Orrin Hatch (R-UT) are co-sponsors of the Affordable Housing Credit Improvement Act. That bill now has a partner bill before the House, co-sponsored by Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA). The House bill is identical to the Senate bill except that it does not include the 50% phased-in tax credit cap increase proposed in the Senate bill.
Several provisions in the legislation would have a significant impact on the way we manage LIHTC (or AHTC) going forward, which I will outline below.
Averaging income qualification
This new test would allow the 60% AMI ceiling to apply to the average of all unit income qualifications rather than the cap on each individual unit. The maximum level of qualifying income would be 80% AMI, which HUD refers to as Low Income. The thought is that the higher rents associated with the higher level of income targeting will offset the lower rents for tenants qualifying at the lower end of the income scale (40% or 30% AMI). This would increase the affordability of these properties while still maintaining their financial feasibility.
Grandfathering existing tenants with increased income
This provision would allow existing tenants with rental assistance to qualify for the program as long as their income was at a qualifying amount for LIHTC at their initial occupancy and no more than 120% AMI at the time of initial certification.
Changes to student eligibility rules
The current occupancy restrictions for student households would change to require that households composed entirely of full-time adult students under the age of 24 enrolled at institutions of higher education would be ineligible for the program unless they are either married, veterans, disabled or have a dependent child, or they are income eligible independently of their parents/guardians, such as those aging out of foster care or formerly homeless youth. (This appears to be a hybrid of the existing LIHTC student restrictions and those for HUD’s Section 8 program.)
Including Tenant Voucher Payments as rent for certain purposes
Whereas the program currently allows the total contribution toward rent from voucher holders to exceed the applicable gross limits, the proposed legislation would limit it to the rent limit itself for projects electing to use the average income test (as explained earlier) or the basis boost for having 20% of units targeted at or below 30% AMI.
This is not a comprehensive list of all proposed changes to the LIHTC program, but those that we feel will have the most significant impact for compliance purposes. Click below for a summary of both bills.
Senate bill: Affordable Housing Credit Improvement Act of 2017
House bill: Affordable Housing Credit Improvement Act of 2017
Thoughts on these proposed changes? Please share them below in the comment area.