Senator Wyden Introduces Middle-Income Housing Tax Credit
U.S. Senator Ron Wyden (D-OR) recently introduced legislation to create a middle-income housing tax credit (MIHTC) intended to encourage the development of affordable housing for Americans with moderate incomes. The bill is modeled after the LIHTC program. The legislation aims to provide a comprehensive affordable housing package in tandem with the low-income housing tax credit (LIHTC), a tool Wyden has long supported that’s helped to finance construction of affordable rental units.
Under the proposed bill, the federal government would allocate tax credits to the states based on population. For 2019, the allocation would be $1 per capita with a $1.14 million small state minimum. An additional 5 cents per capita above this allocation would be reserved for middle-income housing developed in rural areas. State housing authorities would then allocate the tax credits to developers through a competitive process. The tax credits would be provided to developers over a 15-year compliance period. The credit amount would equal 50 percent of the present value of the qualifying costs, or 5 percent a year on an undiscounted basis. However, state housing authorities would allocate only so much credit as makes a housing project feasible.
To qualify for the credit, a rental site would need to meet two affordability standards: (1) a property would have to include a minimum percentage of affordable units; and (2) rents for those units could not exceed maximum amounts based on average incomes in the area. Specifically, at least 60 percent of the property’s units must be occupied by individuals with incomes of 100 percent or less of Area Median Gross Income (AMGI). Furthermore, tenants’ rents must not exceed 30 percent of AMGI. The affordability restrictions would remain in place for up to 15 years after the compliance period. Credits would be discontinued to the developer if a site fails to meet these income/rent requirements.