Year-End Stimulus Gives Boost to LIHTC Development, Struggling Renters
Congressional negotiators recently struck a deal on a bipartisan year-end legislative package, which includes a change that has been advocated by LIHTC proponents for a long time. In the proposed $900 billion federal relief package, lawmakers proposed a floor rate of 4 percent, separating the LIHTC program from borrowing rates set by the Treasury Department. The new floor rate will apply to projects that receive tax credits after Dec. 31.
As a result, the credits will be worth more and become more attractive to corporate investors, who receive a reduction on federal income taxes for 10 years based on the rate. There has been long-building pressure to make this floor rate change to the LIHTC program by developers and industry groups. The minimum 4 percent housing credit rate was a key provision in the bipartisan Affordable Housing Credit Improvement Act of 2019, which is co-sponsored by more than half the House of Representatives and 40 percent of the Senate.
The provision was also included in the House-passed Moving Forward Act infrastructure legislation, Senators Ron Wyden (D-OR) and Maria Cantwell's (D-WA) Emergency Affordable Housing Act of 2020, and Senate Democrats’ Economic Justice Act, and gained the support of 103 bipartisan members of the House who signed a letter to leadership urging its passage in summer 2020.
The rate had hovered between 3.07 and 3.09 percent in recent months. The increase to 4 percent in 2021 will make available an infusion of housing credit equity into developments for which additional financing is necessary, providing for an additional 130,000 affordable homes from 2021 to 2030, according to estimates from Novogradac and Co.
In addition to the rate change, the stimulus deal includes disaster housing credit allocations, rental assistance, and direct economic relief for workers and families.
Disaster Housing Credit Allocations
The legislation provides $1.2 billion in disaster LIHTC allocations for qualified disaster zones. These are the 11 states and Puerto Rico that experienced non-COVID-19 major disasters in 2020 that qualified for Federal Emergency Management Agency (FEMA) individual and public assistance with an overall cap of no more than 65 percent of the respective state LIHTC ceiling.
For 2021, the allocation will be the lesser of $3.50 multiplied by the number of residents in qualified disaster zones or 65 percent of the state’s 2020 credit allocation, and unused credits may be carried over to 2022. Eligible buildings will also receive a one-year extension of the placed-in-service deadline and 10 percent test deadline for the disaster credits.
Qualified disaster zones are those determined by the president, from Jan. 1, 2020, to 60 days after enactment of the legislation, to warrant individual or individual and public assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act due to disasters other than COVID-19.
Relief for Renters
The COVID-19 relief legislation includes $25 billion for emergency rental assistance to be distributed by the Treasury Department to states based on population, with small states receiving a minimum of $200 million.
Funds will be administered by state and local grantees. Renters will apply and, upon qualifying, payments will be sent directly to owners and/or utility service providers. If an owner doesn’t want to participate, the grantee may provide funds directly to the eligible household. And owners may apply for assistance on behalf of tenants, with the tenants’ consent.
According to the language of the legislation, no less than 90 percent of the funds can be used for payment of rent, rental arrears, utilities and home energy costs, utility and home energy arrears, and related housing expenses. And up to 10 percent of the funds will be available for housing stability services, such as case management and tenant-landlord mediation. Support can cover up to 12 months of assistance in three-month increments, though an additional three months of assistance may be provided if it’s needed for housing stability.
Households are eligible if they earn 80 percent of area median income (AMI) or less, with priority for households making 50 percent of AMI or less, or those who have been unemployed for at least 90 days. Households must be able to demonstrate a risk of homelessness or housing instability, and have one or more household members who qualify for unemployment benefits or experienced financial hardship due to the pandemic. Grantees may also develop additional eligibility criteria.
Eviction moratorium extended. The legislation also extends the current eviction moratorium through Jan. 31, 2021. The moratorium, which was first enacted by the Centers for Disease Control and Prevention in September, was set to expire on Dec. 31.
Additional relief. The legislation includes another round of stimulus checks that are capped at $600 for individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent. Here are the other provisions that may help struggling renters:
- An additional $300 per week for workers receiving unemployment benefits through March 14, 2021, and an increase of the maximum number of weeks an individual may claim benefits to 50 weeks;
- An additional $13 billion to combat food insecurity, including a 15 percent increase for SNAP nutrition assistance and additional funding for food banks, senior nutrition programs, and school and day care feeding programs;
- $10 billion in emergency funds for the child care sector and $250 million for Head Start providers;
- $7 billion to expand broadband access, including $3.2 billion in emergency funds for low-income families to access broadband and the creation of a $1 billion tribal broadband fund; and
- Provisions to strengthen the Earned Income Tax Credit and Child Tax Credit for households who experienced lower wages in 2020 due to the pandemic.
With regard to income calculations, treat this round of stimulus checks and unemployment insurance the same as you did with the first round of payments authorized under the CARES Act. Stimulus checks, and the enhanced unemployment insurance assistance, should not be counted toward income. Because the stimulus assistance is technically an advance tax credit, and because the up to $300 per week federal unemployment insurance payments issued are temporary, they are not to be included in calculations of income. However, regular payments of unemployment insurance issued by the state are treated as income, as is customary under HUD Handbook 4350.3, par. 5-5(A)(1).