FY2015 Budget Proposals for LIHTC
There has been some activity lately by our esteemed leaders in Federal City, AKA Washington, DC, dealing with the Low-Income Housing Tax Credit (LIHTC) program. In early March, the Obama Administration submitted its FY2015 budget to Congress, which includes a few noteworthy provisions dealing with LIHTC. Having just returned from a 5th grade class trip with one of my daughters to our fair capital city, all of this feels especially relevant to me right now. (And yes, among the factoids I took away from the trips was that Federal City was the first name given to our nation’s capital in the planning stages of its development.)
Under the subheading, “Reform and Expand the Low-Income Housing Tax Credit,” there are six different provisions outlined in this year’s budget proposal for LIHTC. These include allowing the conversion of Private Activity Bond Volume Cap into Low-Income Housing Tax Credits to expand each state’s potential credit pool, thus providing more resources for housing credit development, changing the formulas for determining the 9% and 4% Applicable Percentages as they apply to non-federally subsidized and federally subsidized LIHTC properties, and making LIHTC beneficial to Real Estate Investment Trusts (REITs). Among those with greater applicability to the management of LIHTC properties, we have a couple of repeat provisions from years past and one new proposal of note.
Making its fourth consecutive appearance as part of the administration’s budget proposals is broadening the income criteria to support the creation of mixed-income housing by adding a third minimum set-aside option available for owners to elect at the end of the first year of the credit period. This would allow for at least 40 percent of the units in the project to be qualified by and occupied by households having incomes that average no more than 60 percent of Area Median Income (AMI). The cap on income-targeting would be 80 percent of AMI, and any set-asides less than 20 percent AMI would be included in the average as having 20 percent targeting. Of course this will open up the LIHTC applicant pool to a larger portion of qualifying families which will increase the income diversity and hopefully help meet the goal of serving the needs of those most in need. In addition, this portion of the proposal would allow for existing tenants at acquisition/rehab properties to qualify for the LIHTC program as long as their initially qualifying income was no greater than 60 percent AMI and their income at LIHTC qualification is no more than 80% AMI, if it exceeds the 60% limit. This will make it easier for in-place tenants to remain qualified when tax credits are layered onto their property’s existing subsidies. This, in turn, may make preservation deals more attractive to developers.
And speaking of preservation, a provision to add preservation of federally assisted affordable housing to LIHTC allocation criteria of each state’s Qualified Allocation Plan (QAP) is once again included in the annual budget proposal.
Finally, the newest of these provisions proposes to add the requirement that Extended Use Agreements at LIHTC properties must include language to protect victims of domestic violence in order to enforce the Violence Against Women Act (VAWA) Reauthorization Act of 2013. In addition, selection criteria protection could be given to those falling into this category under the special needs population exception that was added in 2008 with the Housing and Economic Recovery Act (HERA) for tax credit properties. It makes special note that these protections would be in place for occupants of both low-income and market-rate units at these properties.
Just as it is every year, these proposals along with everything else included will be under congressional scrutiny for many months to come before we know the outcome. I am a huge proponent of keeping our eyes on the LIHTC horizon, however, so I feel a duty to our readers (and our students as well) to help them stay current and abreast of any and all regulatory proposals and developments. If you would like to read the General Explanations for the 2015 budget proposal yourself, you may do so here
http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2015.pdf