In the face of an ongoing affordable housing crisis, advocates are increasingly vocal about the need for legislative action that could dramatically reshape housing finance in the United States. The push is being spearheaded by organizations like the Affordable Housing Tax Credit Coalition (AHTC), which are urging the House Committee on Ways and Means to prioritize reforms, including the expansion of Private Activity Bonds (PABs) aimed at facilitating affordable housing development. As housing costs continue to climb, the urgency for effective legislative measures has never been more pressing. AHTC’s CEO, Emily Cadik, articulated hope for substantial advancements in the upcoming lame duck session, claiming these proposals are essential to both expanding housing credits and minimizing the financial barriers that currently hinder development projects.
The Affordable Housing Credit Improvement Act (AHCIA), which has been lingering in Congress for an impressive span of seven years, has become a focal point for those in favor of extensive housing reforms. This Act was reintroduced in May 2023, and its proponents are keenly urging legislators to examine its potential benefits. The AHCIA proposes amendments to current financing thresholds for Low Income Housing Tax Credits (LIHTCs), crucial financial instruments that underpin affordable housing projects. Presently, developers must finance at least 50% of a housing project using PABs to qualify for 4% LIHTCs. Advocates contend that a reduction of this threshold to 25% would enhance efficiency in the allocation of tax-exempt bonds and unlock vital private financing sources.
The current constraints surrounding bond financing pose considerable challenges. Many states have either exhausted or are nearing their bond volume caps, limiting their ability to facilitate new affordable housing projects. By advocating for the AHCIA and its proposals, housing advocates seek to empower states with greater financial flexibility to meet housing demands. The anticipated reform may not only lead to enhanced utilization of financial resources but also a broader array of opportunities for municipalities struggling with affordability issues. As Cadik noted, the impending legislative session presents a prime opportunity for these proposals to gain traction, especially when supported by key congressional champions.
The National Council of State Housing Agencies (NCSHA) stands in solidarity with the AHTC’s mission, submitting its own letter of support to the Ways and Means Committee that echoes many of the same sentiments. Specific calls for the removal of caps on mortgage revenue bonds and multifamily housing bonds for a five-year duration are critical components of their shared vision. This grace period is posited as a necessary measure for municipalities to catch up with the growing demand for affordable housing projects. The justification behind the removal of caps stems from precedents set by other private activity bonds that are exempt from such limits, underscoring a perceived inconsistency in policy.
Adding momentum to these housing initiatives is the supportive stance taken by Vice President Kamala Harris. Housing advocates have expressed gratitude for her commitment to advancing housing production via the housing credit system. The bipartisan interest in the AHCIA raises the likelihood of its advancement, regardless of political shifts in the upcoming presidential election. The prospect of changes to the Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of 2025, could also open additional pathways for PAB reforms. As both parties grapple with the implications of these expiring tax provisions, the importance of housing finance reform will likely remain an essential topic on the legislative agenda.
The conversation surrounding affordable housing has evolved into an essential discourse within U.S. politics. As legislative sessions unfold, advocates are urging for a concerted focus on resolving the accessibility and affordability issues that plague many communities. By transforming existing tax credit frameworks and adjusting bond financing requirements, there is potential to create a more dynamic environment for affordable housing development. As Cadik has pointed out, the impending years will require bipartisan collaboration to address the critical challenge of housing affordability, ensuring that impactful reforms are enacted to benefit countless Americans.