Bipartisan Bill Seeks to Unlock American Rescue Plan Funds for Stalled LIHTC Developments
Reps. Alma Adams (D-N.C.) and David Rouzer (R-N.C.) recently announced the LIHTC Financing Enabling Long-Term Investment in Neighborhood Excellence Act or LIFELINE Act. This legislation would make American Rescue Plan funds more compatible for LIHTC housing developments.
Earlier this year, the Treasury Department issued a final rule pertaining to the State and Local Fiscal Recovery Fund (SLFRF), which was created by the American Rescue Plan Act of 2021 (ARPA). According to that rule, SLFRF dollars must be obligated by Dec. 31, 2024, and expended by Dec. 31, 2026. The LIFELINE Act was drafted in consultation with the Treasury Department, the authorizing committees for SLFRF, and housing stakeholders.
“Over 20 states have declared their intention to use money from the American Rescue Plan to ensure that the pipeline of affordable housing units will remain robust,” said Adams. “Our legislation removes the statutory barriers in place so that cities, counties, and states can use their State and Local Fiscal Recovery Fund (SLFRF) dollars to support affordable housing developments.”
The bill’s passage would allow LIHTC developers to fill financing gaps at a time when development costs have risen significantly. Not only have material costs increased dramatically, but rising fuel costs also have increased the cost of transportation of all materials. While all developers are facing similar cost challenges, unlike developers of market-rate apartments who can charge higher rents, developers of rent-restricted projects using tax credits or other government aid can’t raise rents and the rising development costs could stop an entire project.
As it currently stands, the Treasury Department’s final rule presents an immediate and insurmountable barrier for states and localities wishing to use SLFRF dollars to offset those increased costs. Because funds must be expended by 2026, states can’t continue to make LIHTC payments for the duration of previously negotiated contracts; nor can these funds be given immediately as grants without reducing the cost basis for developers and disincentivizing construction, said Reps. Adams and Rouzer in a circulated “Dear Colleague” letter to their fellow members of the House, urging them to cosponsor the LIFELINE Act. Specifically, the bill would allow state and local governments to use the recovery funds to make long-term loans to LIHTC projects.