WASHINGTON, DC–The $1.3 trillion Omnibus spending bill that was approved by Congress and begrudgingly signed by the President last week contained the first expansion of the Low Income Housing Tax Credit (LIHTC) program in more than 10 years. Indeed the bill in general was very generous to affordable housing with a $4.7 billion increase in HUD's budget and an increase in the number of affordable housing units that are eligible to be preserved and improved through the Rental Assistance Demonstration process. But the expansion of the LIHTC is particularly welcome as it will help offset the effects of the Tax Reform bill that passed last year — namely the lowered corporate tax rate, Scott Alter, co-founder and principal at the New York-based Standard Communities tells GlobeSt.com.
“This is a pretty good day for the affordable housing industry,” he says.
The spending bill increased the number of LIHTCs that are available to the US states for the next four years by 12.5%. In some states these tax credits are a limited resource especially in California and New York so the increase will have a significant impact in these areas, Alter says.
The spending bill also broadened the applicability of properties that may not have otherwise qualified as affordable housing by allowing for income averaging. “This is something the tax credit industry has been lobbying for for years,” Alter says. Prior to the bill, a property qualified as affordable by having 20% of the properties restricted to residents who earn 50% of AMI or less, or by having at least 40% of the property restricted to residents who earn 60% of AMI. Income averaging adds flexibility to this formula by allowing for more mixed income residents. “This will make it easier to preserve affordable housing in high cost areas and in areas that are gentrifying,” Alter says.
For instance, he says, Standard Communities will often look at market rate properties that are on the brink of gentrification and try to add affordable components. Income averaging will help with that process, Alter says.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
